With reference to physical capital in Indian economy, consider the following pairs:
| Items | Category |
|---|---|
| 1. Farmer's plough | Working capital |
| 2. Computer | Fixed capital |
| 3. Yarn used by the weaver | Fixed capital |
| 4. Petrol | Working capital |
How many of the above pairs are correctly matched?
Detailed Explanation:
Answer: Option 2 — Only two
Physical capital is classified into fixed capital (durable assets used repeatedly over time) and working capital (consumable items used up in production). Among the given pairs, only the computer (fixed capital) and petrol (working capital) are correctly categorized.
❌ Pair 1 – Incorrect: A farmer's plough is a durable tool used repeatedly over multiple production cycles, making it fixed capital, not working capital.
✅ Pair 2 – Correct: A computer is a long-term asset used over an extended period, correctly classified as fixed capital.
❌ Pair 3 – Incorrect: Yarn used by a weaver is consumed in the production process and needs regular replacement, making it working capital, not fixed capital.
✅ Pair 4 – Correct: Petrol is consumed during production and requires regular replenishment, correctly classified as working capital.
📝 Short Notes: Physical Capital Classification
| Type | Definition | Examples | Characteristics |
|---|---|---|---|
| Fixed Capital | Durable assets used repeatedly over time in production | Machinery, buildings, tools, computers, ploughs, tractors | • Not consumed in single use • Long productive life • High initial investment • Depreciation over time |
| Working Capital | Raw materials and consumables used up in production | Raw materials, fuel, petrol, yarn, seeds, fertilizers | • Consumed in single production cycle • Need regular replenishment • Circulating in nature • Lower per-unit cost |
Question 1 of 2 Economic Systems
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First question in this topic
If a commodity is provided free to the public by the Government, then