Question

Explain the term 'Physical capital' How can you define the various inputs requried for a production activity?
Explain​

Answer 1

Answer:

Physical capital refers to a factor of production (or input into the process of production), such as machinery, buildings, or computers.

Factors/Requirements for Production

Every production is organised by combining land, labour, physical capital and human capital, which are known as Factors of Production.

There are 4 factors/requirements for the production of goods and services.

1. Land and Raw Materials: - They are a gift of nature and it is essential for any sort of production

2. Labour:-

Labour refers to the people who work for the production of goods and services.

There are 3 types of Labour - Skilled / Semi-Skilled  and Unskilled

Some production activities require highly educated workers to perform the necessary tasks, whereas some other require workers who can do work manually.

3. Capital/Physical Capital : -

Capital refers to the investments made to produce goods and services.

There are 2 types of Capital namely Fixed Capital & Working Capital.

Fixed Capital: The part of physical capital which can be used in process of production over many years and cannot be altered in short periods. Tools, Machinery, Building etc.

Working Capital: The part of physical capital which can be used in production to make payements and buy other necessary item in short periods.  Raw Materials, Money in Hand

4.  Human Capital : -  

The person having knowledge & enterprise puts together land, labour and physical capital to produce an output either for himself or to sell in the market. This is the Human Capital.

Without Human Capital land, labour and capital are useless. Therefore it is the most important factor/requirement for production

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