Physical capital comprises real assets yielding services to producing firms or consuming households.

Tangible wealth is physical capital plus land.

Present values convert future receipts or payments into current values.

The present value of a perpetuity is the constant annual payment divided by the rate of interest (expressed as a decimal fraction).

Nominal interest rates measure the monetary interest payments on a loan.

The real interest rate is the nominal interest rate minus the inflation rate over the same period and measures the extra goods a lender can buy by lending for a year and delaying purchases of goods.

The firm’s demand for capital services is its marginal value product of capital curve. Higher levels of the other factors of production and higher output prices shift the derived demand curve up.

The industry demand for capital services is less elastic than the horizontal sum of each firm’s curve because it also allows for the effect of an industry expansion in bidding down the output price.

The required rental is the rental that allows a supplier of capital services to break even on the decision to purchase the capital asset.

The asset price is the price at which a capital good is bought and sold outright.

Land is the special capital good whose supply is fixed even in the long run.

The functional distribution of income shows how national income is divided between the factors of production.

The personal distribution of income shows how national income is divided between different individuals regardless of the factor services from which income is earned.