The analysis of the demand for the services of capital parallels closely that of labour demand: the rental rate for capital replaces the wage rate and capital services replace the hours of
labour. It is important to keep in mind the distinction we drew above between capital services on the one hand and the amount of capital on the other. Capital services are produced by capital
assets, just as work is produced by humans. Terms that are analogous to the marginal product of labour emerge naturally: the marginal product of capital (
) is the output produced by one additional unit of capital services, with other inputs
held constant. The value of this marginal product (
) is its value
in the market place. It is the 
multiplied by the price of output.
The 
must eventually decline with a fixed amount of other factors of
production. So, if the price of output is fixed for the firm, it follows that the 
must also decline. We could pursue an analysis of the short run demand for capital services, assuming labour was fixed, that would
completely mirror the short run demand for labour that we have already developed. But this would not add any new insights, so we move on to the supply side.
The marginal product of capital is the output
produced by one additional unit of capital services, with all other inputs being held constant.
The value of the marginal product of capital is
the marginal product of capital multiplied by the price of the output it produces.
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