ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The capital that is consumed by an economy or a firm in the production process is known as depreciation. It means decline in the value of fixed assets due to use, passage of time or obsolescence or diminution in intrinsic value of the asset due to use and/or lapse of time.

Detailed explanation-2: -To them, capital consumption means the decrease in value, at current prices, of durable physical assets. Alternatively, it may be defined as the present cost of replacing the current loss in economic worth from wear and tear and obsolescence of physical assets.

Detailed explanation-3: -The Capital Consumption Allowance (CCA) is the portion of the gross domestic product (GDP) which is due to depreciation. The Capital Consumption Allowance measures the amount of expenditure that a country needs to undertake in order to maintain, as opposed to grow, its productivity.

Detailed explanation-4: -The third factor of production is capital. Think of capital as the machinery, tools and buildings humans use to produce goods and services. Some common examples of capital include hammers, forklifts, conveyer belts, computers, and delivery vans. Capital differs based on the worker and the type of work being done.

Detailed explanation-5: -Definition of Capital Consumption This is the loss of capital equipment due to depreciation. Depreciation can occur due to the machines wearing out, getting lost or breaking down. Capital can also become obsolete through advances in technology. Capital consumption can also occur due to a shift in demand.