Q. 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?
Exp) Option b is the correct answer.
Pair 1 is incorrect: While a plough is necessary for production, working capital refers to items that are consumed in the production process. A plough is a durable item that can be used for many production cycles. Therefore, it is classified as fixed capital.
Pair 2 is correct: Fixed capital refers to physical assets that are used in the production process for a relatively long period. A computer is a durable item that is used in the production of goods or services for several years.
Pair 3 is incorrect: Yarn used by the weaver can be considered as working capital. Working capital refers to the funds or resources that a business uses for its day-to-day operations, including the purchase of raw materials like yarn, payment of wages, and other operational expenses.
Pair 4 is correct: Working capital generally refers to the funds or resources that a business uses for its day-to-day operations and short-term expenses, such as raw materials, inventory, wages, and other operational costs. Petrol is consumed in the production process.
Source: https://www.investopedia.com/terms/f/fixed-capital.asp
