CONCEPT OF INVESTMENT. What is concept of investment? Definition of investment: Investments may be defined as expenditure on physical assets which are not for immediate consumption but for the production of consumer and capital goods and services.
Meaning of investment
Investment has two related meanings
- It could mean the actual production of real capital in economic theory such as building of new factory and purchase of new vehicles.
- It could also mean, in financial term, the deposit of money in bank and purchase of stock or government securities.
Types of investment
There are several types of investments but in this post I am going to clearly explain the two major types of investment
- Individual investments: This is the type of investment embarked upon by a household or an individual in order to increase his income and raise his standard of living. Examples are investments in houses and motor vehicles.
- Corporate investments: This includes investment by companies and other organizations with die sole aim of making profits. Examples are investments on plants and machinery and buildings.
- Government investment: Government investments includes the setting up of corporations with the sole aim of providing essential services rather than making of profits, e.g. provision of electricity, water and healthcare services.
Once you are familiar with the different types of assets you can begin to think about piecing together a mix that would fit with your personal circumstances and risk tolerance.
These are more suitable for long term investors that are willing and able to withstand market ups and downs.
Shares are considered a growth investments as they can help grow the value of your original investment over the medium to long term.
If you own shares, you may also receive income from dividends, which are effectively a portion of a company’s profit paid out to its shareholders.
Of course, the value of shares may also fall below the price you pay for them. Prices can be volatile from day to day and shares are generally best suited to long term investors, who are comfortable withstanding these ups and downs.
Also known as equities, shares have historically delivered higher returns than other assets, shares are considered one of the riskiest types of investment.
FACTORS THAT DETERMINE INVESTMENT
Here a list of factors that determines investment and investment return
(1) Savings: The amount of money saved determines, to a large extent, the level of investment.
- Level of income: The higher the income earned, the higher the level of investment and vice versa.
- Rate of taxation: Higher taxation on one’s income reduces investment and vice versa.
- Interest rate: High interest rate charged by banks discourages borrowing, which leads
leads to low investment while low interest rate encourages borrowing leading to high investment.
- Future expectation: When an investor expects a brighter future, this will encourage him to invest.
- Business atmosphere: Investors are more interested in investment in a stable economy than those with economic instability.
- Changes in technology: The Level of investments is greatly influenced by changes or improvements in techniques of production through inventions and innovation
- Changes in level consumption: A high level of consumption generally leads to low investments and vice versa.
- Profit earned: high profit earned by individuals or firms do encourage investment while love profits discourage it.
- Political climate: Investments thrives in a politically stable environment while investments is reduced in places with political instability.
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49. FORAGE CROP AND PASTURE
Definition: The law of variable proportion, also known as the law of diminishing marginal productivity states that if one factor of production is continuously increased by a constant amount, while other factors are held fixed in quantity, then, after a certain point, the resulting increases in output will begin to diminish. In other words, the law of variable proportions holds that if increasing quantities of one factor are combined with a fixed supply of others in production, a point is reached from which each extra variable factor added yields less and less addition to the total output. That is as more and more of the variable factor is combined with a fixed quantity of other factors, ultimately, its average product and marginal product will begin to decrease.
The law of variable proportions is useful in the wing ways As business houses are assumed to be out to raise their profits to a maximum, it helps the entrepreneur to determine the optimal combination of factors to achieve this objective.
It becomes in very useful in fixing a worker’s wages, since a worker ought to be paid according to his marginal productivity.
A firm grasp of the law of variable proportions is essential to understand short-run cost curves and hence, the short-run theory of the firm.