Q. 8

Explain any three differences between physical capital and human capital.

Answer :

The physical and human capital are factors of the production. Physical capital is the inputs which are used at various stages of productions. There are two types of physical capital: fixed capital and working capital. Fixed capital includes those assets which can be used over many years in the process of production like machines in factory, building, tools etc. Working capital includes raw materials which will be converted into finish goods and money in hand which will be required to purchase raw material or any other item during production.

To make use of land, labour and physical efficiently, we will need somebody who acquires knowledge of producing goods and services. Without human capital, Land, labour and physical capital are meaningless. Differences between them are:


• Investment in physical capital increases finished goods whereas investment in human capital increase knowledge and skills which can be used to utilize the resources efficiently.


• Physical capital can be bought or sold in the market whereas human capital cannot be sold. It can be acquired, and only their services can be sold.


• Physical capital is a different entities from the owner of the production whereas human capital is not separable from the owner.


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