What are Capital Resources?

Definition: The term capital resource is an economic concept that refers to man-made elements employed to produce goods or services. They are resources that allow the company to carry on with its productive activities.

What Does Capital Resource Mean?

Capital resources are easily identified if we take the concept to a daily-routine environment. The concept refers to infrastructure, tools, equipment and machinery that a company exploits to produce an output. These resources are present in both manufacturing and services companies, since the concept’s application is broad enough to be used in both contexts.

The difference between these capital resources and the factors of production, which is an economic concept too, is that capital resources point to man-made items, while factors of production refer to both natural and man-made resources (such as land and labor).

Capital resources include things like office buildings, manufacturing facilities and machinery in general. An economy benefits when capital resources investment increases because it means that productive output should be increased too, that means a higher level of employment and an overall improvement in the economic system.

Let’s take a look at the following example

Example

All Folders Co. is a company that manufactures paper and carton folders for business and academic purposes. The company is currently offering a wide variety of models that include modern designs and customized folders. These new offering increased the company’s sales, which resulted in a need to increase the plant’s capacity. In order to do this, the company will invest a given amount of money to expand its installed capacity to meet this new level of demand.

By investing in capital resources such as new machinery and equipment for the plant the company is expanding itself and increasing its output. This will have a positive impact in the nearby community because of new job positions that might be created and more taxes being paid to different levels of government.