CMA Foundation · Fundamentals of Business Economics and Management · Means of Production
Ramesh runs a bakery in Pune. He buys an oven for ₹80,000, buys flour worth ₹20,000 for the month, and also holds ₹50,000 in his savings account that is not used in the business. From the economic viewpoint, how much of this is capital used in production?
The capital used in production is ₹1,00,000. The oven worth ₹80,000 and the flour worth ₹20,000 are man-made goods used to produce further goods. The idle savings of ₹50,000 are not being used in production, so they are not counted.
- A₹50,000
- B₹80,000
- C₹1,00,000Correct
- D₹1,50,000
Explanation
Capital is a produced means of production used to create further goods. The oven (₹80,000) and flour as working stock (₹20,000) both qualify, totalling ₹1,00,000. Idle savings are not used in production, so the ₹1,50,000 option is wrong.
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