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Questions
Explain any two characteristics of capital.
Explain any five characteristics of capital as a factor of production.
Discuss any three characteristics of capital.
Mention two important characteristics of capital as a factor of production.
Solution 1
The main characteristics of capital are as follows:
- Capital is man-made: It is created by man and is not a gift of nature. It is the mixed result of the past labour of workers on natural resources. Capital is created It is a produced means of production.
- Capital is durable: Capital goods such as machinery, plants and factory buildings are durable goods which might last for a few years, while others may last for decades.
- Capital is a Passive Factor of Production: Like land, capital is also a passive factor of production. It cannot produce anything by itself. It becomes effective only when it is used by labour.
- A Mobile Factor: Capital is the most mobile factor of production. It is easily transferable from one place to another and also from one occupation to another.
- Supply of Capital is Elastic: The supply of capital is elastic. It can be easily increased or decreased because it is man-made.
- Capital is Subject to Depreciation: A capital asset, while in use, loses its value due to wear and tear. Its money value becomes less and less with the passage of time. This fall in value is termed depreciation.
- Capital is the Result of Past Savings: Capital goods can be produced and increased in stock only after saving money and reinvesting it. Hence, capital can be rightly called the outcome of savings.
Solution 2
- Capital is a produced means of production.
- Capital is a passive factor of production.
- Capital is a mobile factor. It can move from place to place and occupation to occupation.
- The supply of capital can be changed according to demand.
- Capital depreciates in value with its constant use.
Notes
Students should refer to the answer according to their questions.
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