1.

Explain capital as a factor of production.

Answer»

Capital:

  • All manmade goods which help in production are called capital. Capital differs from land and labour as it is a ‘produced’ factor of production. In other words, it is a manmade factor of production.
  • For example, a tractor is a ‘produced’ factor of production which further helps in the production of agricultural goods.

Characteristics of capital:

  • Capital is a manmade factor of production.
  • It is the most mobile of all factors of production.
  • The increasing demand for capital in present times owing to increasing capital intensive methods of production has resulted in increasing scarcity of this factor.
  • The remuneration of capital is called ‘interest’.


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