Question

Discuss five characteristics of capital as a factor of production.

Answer 1

Five characteristics of capital as a factor of production are:
A) Capital is a produced means of production: The composition or supply of capital is not automatic, but it is produced with the joint efforts of labour and land. Therefore, capital is a produced means of production.

B) Capital depreciates: As we go on using capital, the value of capital goes on depreciating. When machines are used continuously for some time, these depreciate and their value falls.

C) Capital is variable: The total supply of land cannot be changed, whereas the supply of capital can be increased or decreased. If the residents of a country produce more or save more from their income, and these savings are invested in factories or capital goods, it increases the supply of capital.

D)Capital is more mobile: Of all the factors of production, capital is the most mobile. Land is perfectly immobile. Labour and entrepreneur also lack mobility. Capital can be easily transported from one place to another.

E) Capital is destructible: All capital goods are destructible and are not permanent. Because of the continuous use, machines and tools become useless with the passage of time.