The extra value of potential output, at current prices, resulting from a small increase in capital, per unit of the extra capital. This is contrasted with the marginal efficiency of capital (MEC), which is the highest interest rate at which a project can be expected to break even. The marginal productivity of capital considers only the marginal revenue from the extra output which an increase in capital makes possible; if this exceeds the interest on the cost of the capital, it results in a profit. This profit margin is subject to erosion over time if the real price of the product is expected to fall, or real wages or fuel and material costs are expected to rise. The MEC is the interest rate at which prospective profits have to be discounted to make their present discounted value equal to the cost of the capital.

• public choice
• public company
• public corporation
• public expenditure
• Public Expenditure Survey Committee
• public finance
• public goods
• public interest
• public limited company
• public ownership
• public procurement
• public sector
• Public Sector Borrowing Requirement
• public sector debt
• Public Sector Debt Repayment
• public spending
• public utility
• public works
• pump priming
• punishment strategy
• purchase tax
• purchasing power
• purchasing power parity
• pure floating exchange rate
• put option