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1. Durability
Because capital goods are so durable the purchase of new capital goods are discretionary and can be postponed. Optimisim about the future may promt firms to invest big into a new facility. While a leaa optimistic view may lead firms to invest small into reparing older facilities to keep in use.
2. Irregularity of Innovation
Technological progress is a major determinant of investment. New products ond processes stimulate investment. But as history shows major innovations such as the computer or electricity are very irregular. When they do happen though there is an upsurge in investment spending that in time will recede.
3. Variability of profits
When deciding whether or not to invest, a firm's expectations about potential profitability of the investment are influeced by the size of profits earned by other firms from similar investments. Inclining profits gives firms greater incentives and means to invest, while decling profits have an inverse effect. Sice actual profits are variable this adds doubly to the instabiltiy of investment.
4. Variability of expectations
firms project current business conditions into the future, but their expectations can change when an event happens that could cause a possible change in future business conditions. for example exchange rates, international peace, and legislative actions can all change future business activities and invesments. The stock market has an influence on business expectations because firms are constantly looking to it as an indicator of society's overall confidence in future business conditions.
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