Question

Distinguish between fixed capital, working capital, and human capital.

Answer 1

Fixed capital: Tools and machines range from a plough to a tractor and sophisticated machines like generators, turbines, computers, etc. The tools, machines, buildings which can be used in production over many years are called fixed capital.
Working capital: Production requires a variety of raw materials. It requires money to make payments and buy other necessary items. Raw materials and money in hand are called working capital. Unlike tools and machines, these are used up in production.
For example, Yarn required by a weaver; clay used by a potter.
Human capital: One needs knowledge and enterprise to be able to put together land, labour and physical capital and produce an output; either to use it by oneself or to sell in the market. This is known as human capital, which enables better production with human skill and knowledge.Human capital is a quantification of the economic value of a worker's skill set. This measure builds on the basic production input of labor measure where all labor is thought to be equal. The concept of human capital recognizes that not all labor is equal and that the quality of employees can be improved by investing in them; the education, experience and abilities of employees have economic value for employers and for the economy as a whole.