distinguish between physical capital and human capital
Answers
Human Capital vs Physical Capital
There are a number of factors of production that are essential for the production process. One such factor of production is capital which may be in the form of cash, buildings, machinery, or even human skills and expertise. Human capital is the skills, knowledge, experience contributed by the firm’s employees. Physical capital refers to manmade assets that are used in the production process to manufacture goods and services. The article takes a closer look at these two types of capital, the human capital and physical capital, and explains their similarities and differences.
What is Human Capital?
Human capital refers to the skills, training, experience, education, knowledge, know-how, and competencies contributed by humans to a business. In other words, human capital can be referred to as the value that is added onto a company by an employee, which can be measured by the employee’s skills and competencies. Human capital is an important factor of production, and employing individuals with the right education, experience, skills and training can improve efficiency, productivity, and profitability.
Companies can invest in their human capital by offering training and education facilities to its workers. Training and developing employees can help them develop a broader set of skills and abilities and reduce cost of hiring additional employees with necessary skills. One thing that must be kept in mind is that humans are not equal to one another and that human capital can be developed in many ways to obtain the highest economic value to the firm.