What is consumption of fixed capital …
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Posted by Harshita Adhikari 5 years, 5 months ago
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Gaurav Seth 5 years, 5 months ago
Fixed capital assets (like machinery, building) depreciate in value in the process of production. Simply put, depreciation means loss of the value of fixed capital assets during production. In other words, depreciation is the value of existing capital stock that has been consumed (used up) in the process of producing output.
Fall in value of fixed assets due to normal wear and tear, and expected obsolescence is called consumption of fixed capital. This is sometimes also called current replacement cost. The loss of value in capital goods is mainly due to two reasons : (i) normal wear and tear, and (ii) expected obsolescence.
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