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CMA Foundation · Fundamentals of Business Economics and Management · Utility, Wealth, Production

In economics, which of the following is classified as 'capital' as a factor of production?

A machine installed in a textile mill is capital because it is a man-made produced good used to produce other goods. Natural resources belong to land, human effort to labour, and risk-bearing and organising to entrepreneurship, so the other options are different factors of production.

  1. AA machine installed in a textile mill in SuratCorrect
  2. BNatural gas reserves under the sea bed
  3. CA mill owner's decision to start a new venture
  4. DA weaver's physical and mental effort

Explanation

Capital is man-made wealth used to produce further goods, such as machinery and tools. Natural gas reserves are land (a free gift of nature). The decision to start a venture and bear risk is entrepreneurship. The weaver's effort is labour.

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