Marginal efficiency of capital and rate of interest are the main factors which affect investment. Demand analysis is the basic aspect of investment.Marginal Efficiency of Capital (MEC) – Any investment decision depends not only on rate of interest but also whether or not the expected rate of returns on the investment is greater than cost of borrowing the funds. In these two factors, the MEC is an important factor because MEC is the expected rate of returns from the investment. If the returns expected are low, then the investment is not profitable because in short run, rate of interest is stable. In MEC, capital means the real productive assets. MEC depends on expected rate of returns of a capital asset over its life time which is also called Prospective Yield and the supply price of capital assets. Any business man will...
Subscribe to:
Posts (Atom)