Define Physical Capital, Fixed Capital, Working Capital and Human Capital with examples

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Define Physical Capital, Fixed Capital, Working Capital and Human Capital with examples.
Answer:

  • Physical capital: Physical capital is the variety of inputs required at every stage during production. It includes fixed capital and working capital.
  • 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.