Physical Capital vs Human Capital

What is Physical Capital?

Physical capital is referred to as one of the three main factors in the production process. Physical capital consists of items like machinery, buildings, equipment, etc.

Physical capital includes man-made goods that are used in the process of production for converting raw material to finished goods. Any new project requires a significant amount of investment in the physical capital.

What is Human Capital?

Human Capital implies the knowledge that a worker brings to the company in the manner of education, talents, abilities, knowledge, preferences, etc. that they have gathered over time. As a consequence, the employees are regarded as an asset, whose value can be enhanced by spending in their coaching and improvement like any other asset of the firm.

The notion makes it obvious that all the workers at the job are unequal, and they contrast in their skills.

This article is a ready reckoner for all the students to learn the difference between physical capital and human capital.

Physical Capital Human Capital
                                                                Definition
The term ‘physical capital’ is used to indicate the data (factor of product) of man-made commodities such as machinery, computers, tools, equipment, etc., which are maintained by the firm . It is used in the manufacturing procedure to allow the change of raw material into finished goods. Human capital refers to the knowledge that a worker brings to the company in the manner of education, talents, abilities, knowledge, preferences, etc. that they have gathered over time. As a consequence, the employees are regarded as an asset, whose value can be enhanced by spending on their coaching and improvement like any other asset of the firm.
                                                            The process of formation
Technical and economic Conscious and social process
                                                              Is it tradeable?
There is a possibility of trading physical capital in the market. Only the services that are rendered by the human capital can be sold.
                                                            Is it separable?
Separable from the owner Not separable
                                                          How does it depreciate?
Depreciation occurs due to continuous use. Depreciation occurs due to ageing and can be minimised to a certain extent.
                                                      Present in financial statements
Yes No
                                                              Mobility restriction
Due to the presence of trade barriers Due to culture and nationality

 The above-mentioned is the concept that is elucidated in detail about ‘Difference between Physical Capital and Human Capital’ for Commerce students. To know more, stay tuned to BYJU’S.

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