Explain the meaning of ‘Physical Capital’. Explain its two types with the help of suitable examples.


Points to remember:

Physical captial and its types - Teachoo.png

Answer to be written in the exam:

Physical capital means the variety of inputs required at every stage during production.

It is divided into two types:

  • Tools, machines, buildings: Tools and machines range from very simple tools such as a farmer’s plough to sophisticated machines such as generators, turbines, computers, etc. Tools, machines, buildings can be used in production over many years, and are called fixed capital
  •  Raw materials and money in hand: Production requires a variety of raw materials such as the yarn used by the weaver and the clay used by the potter. Also, some money is always required during production to make payments and buy other necessary items. Raw materials and money in hand are called working capital.



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Davneet Singh

Davneet Singh has done his B.Tech from Indian Institute of Technology, Kanpur. He has been teaching from the past 14 years. He provides courses for Maths, Science, Social Science, Physics, Chemistry, Computer Science at Teachoo.