All kinds of human occupation and effort are included here, both physical work and skilled mental effort. Capital is a word with many meanings in economics, but it may be defined as the stock of assets accumulated by society which facilitate the economic process. Plant and machinery are the most obvious kind of capital, but roads, schools, and hospitals also represent capital and make an important indirect contribution to the production of goods and services. Although Adam Smith was a pioneer because of his detailed study of the division of labor in the process of production in a pin making shop, his Wealth of Nations pays practically no attention to machines, factories, or industrial production. Two hundred years later, economics text books still limit production resources to the same factors of production, which are based on the eighteenth century social class concepts.
Economists refer to the production outputs as products or commodities .
Products or commodities are classified as goods , which are tangible, and services , which are intangible. The above classification for products and resources constitutes a tacit model of production, called the Static or formal model of production. In addition to macroeconomics, a version of the Static model has also been used as the main model in accounting and financial analysis of projects. Costs include the cost of acquired materials and supplies, cost of labor , and overhead which covers the depreciation of the used capital. These three main sources of costs correspond to the three factors of production in the Static model.