 Definition: Buildings and equipment that are needed to produce consumer goods and services

The capital formation is basically the equipment that is needed to make the consumer products. Examples: A book publisher would need a special book printer to print the books. A Pizza Hut needs ovens to create their pizza. Game designers need special development computers to design their games. The cost of the equipment to make or design the finished product will contribute to the final price of the product.

Price of Consumer Product = Labor(Time) + Raw Material + Capital Formation  Price of Consumer Product- The final price of what the consumer will pay  Labor- How much the company had to pay their staff  Time- Time consumed making the individual unit by the staff  Raw Material- The cost of the resources needed to create the finished product  Capital Formation- The cost of the equipment and space needed for the production