Capital: “Capital is produced means of production.” — Bawerk 

Capital is defined as “All those man-made wealth which are used in further production of goods.” Thus, capital is a man made resource of production. Machines, tools and equipments of all kinds, buildings, railways and all means of transport and communication, raw materials, etc. are included in capital. As such all capital is wealth but all wealth is not capital.

Three functions of Capital:

1. Provision for Appliances: Capital is used to provide tools and implements for use by the workers. It is clear that these things are essential for production, without their aid, large scale production is impossible. 

2. Provision for raw materials: A part of the capital is used for arrangement of raw materials for production. Every concern must have, on hand, a sufficient supply of raw materials. 

3. Increases Employment opportunities: Since capital expands production, it also expands employment. Thus, if we are to reduce the volume of unemployment in a country, we must pay attention to capital formation in the country.