The Neoclassic Theory of Business Investments

Vaduva Cecilia-Elena
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Vaduva Cecilia-Elena: Constantin Brancusi University, Romania

Annals - Economy Series, 2011, vol. 1, 94-105

Abstract: Capital and the work are not perfectly replaceable in accomplishing a constant level of income. The continuous addition of capital makes the costmarginal benefit report decrease. The more the firm combines more capital with relatively less work in order to get a quantity given by the production, the more the marginal productivity of the capital decreases. In determining the expected capital stock, we must specify the relevant time period. The expected stock is the stock considered by the firm as being optimal for obtaining a certain income in the future. The long-term capital demand of the firm depending on the normal level of the production is relatively independent of the current level of income and it depends on the expectations regarding the future levels of income. The current production affects the capital demand as much as it affects the expectations on the future incomes.

Keywords: labor; capital; income; stocks (search for similar items in EconPapers)
Date: 2011
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