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? (UPSC Prelims 2024)
Answer:
Only two
Notes: The correct answer is
[B] Only two. In economics, physical capital is divided into two main categories: Fixed Capital and Working Capital, based on how they are used in the production process.
- Farmer's plough (Pair 1 – Incorrectly Matched): A plough is an tool used in production over many years. Tools, machines, and buildings that can be used in production for a long period are called Fixed Capital.
- Computer (Pair 2 – Correctly Matched): Similar to a plough, a computer is a machine used in the production of services or goods over several years. It does not get "used up" in a single production cycle, making it Fixed Capital.
- Yarn used by the weaver (Pair 3 – Incorrectly Matched): Raw materials like yarn or clay are consumed during the production process to create a finished product. Materials and money in hand that are used up in the short term are called Working Capital.
- Petrol (Pair 4 – Correctly Matched): Fuel and electricity are essential inputs that are exhausted during the act of production. Since petrol is consumed to run machinery or transport goods, it is categorized as Working Capital.