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Explain the meaning of ‘Physical Capital’. Explain its two types with the help of suitable examples.
Answer:
Points to remember:
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.
*(1+2=3)
