# How do you calculate marginal efficiency of capital?

**capital**asset is Rs. 20,000 and its annual yield is Rs. 2000, then the

**marginal efficiency**of this asset is 2000/20000 x 100 = 10 percent. Thus the

**marginal efficiency of capital**is the percentage of profit expected from a given

**investment**on a

**capital**asset.

Regarding this, what is meant by marginal efficiency of capital?

The term “**marginal efficiency of capital**” was introduced by John Maynard Keynes in his General Theory, and **defined** as “the rate of discount which would make the present value of the series of annuities given by the returns expected from the **capital** asset during its life just equal its supply price”.

**marginal efficiency of capital**displays the expected

**rate**of return on

**investment**, at a particular given time. The

**marginal efficiency of capital is**compared to the

**rate of interest**. This theory suggests

**investment will**be influenced by: The

**marginal efficiency of capital**.

In this regard, what is marginal efficiency of capital and investment?

Generally, **marginal efficiency of capital** or MEC refers to the expected rate of profit or the rate of return from **investment** over its cost. **Marginal efficiency** of a given **capital** asset is the highest return that can be yielded from the additional unit of that **capital** asset.

General **Schedule** of Marginal Efficiency of Capital (**MEC**)! The general marginal efficiency of capital (i.e., the marginal efficiencies of all types of capital assets during a given period) represents the **schedule** of the marginal efficiency of capital.