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The marginal efficiency of capital displays the expected rate of return on investment, at a particular given time. The marginal efficiency of capital is compared to the rate of interest.
Apr 25, 2024 · The marginal efficiency of capital (MEC) has several important functions in economics and investment analysis, including investment decisions, optimal capital stock, interest rate analysis, capital budgeting, and macroeconomic analysis.
Meaning of Marginal Efficiency of Capital (MEC): MEC refers to the expected profitability of a capital asset. It may be defined as the highest rate of return over cost expected from the marginal or additional unit of a capital asset. First we must go to the marginal unit of the capital asset and secondly its cost has to be deducted from its return.
The marginal efficiency of capital (MEC) is that rate of discount which would equate the price of a fixed capital asset with its present discounted value of expected income.
Mar 22, 2024 · Marginal Efficiency of Capital (MEC) is a concept in economics used to describe the rate of return expected from an additional unit of capital, such as machinery or equipment, given the cost of that capital.
Marginal efficiency of a given capital asset is the highest return that can be yielded from the additional unit of that capital asset. Keynes defined MEC as ‘The rate of discount which makes the present value of the prospective yield from the capital asset equal to its supply price’.
Read this article to learn about the Marginal Efficiency of Capital (MEC) at business expectations. The marginal efficiency of capital, at any time, depends upon the state of entrepreneurs’ expectations. It is raised by invention and innovation and by the expectation of rising prices.
Nov 29, 2016 · We can then aggregate these schedules for all the types of capital, so as to provide a schedule relating the rate of aggregate investment to the corresponding marginal efficiency of capital in general which that rate of investment will establish.
marginal efficiency of investment, in economics, expected rates of return on investment as additional units of investment are made under specified conditions and over a stated period of time. A comparison of these rates with the going rate of interest may be used to indicate the profitability of.
Keynes defined the marginal efficiency of cap-ital as follows: If there is an increased investment in any given type of capital during any period of time, the marginal efficiency of that type of capital will diminish as the investment in it is increased, partly because the prospective yield will fall as the supply of that type of capital is ...
