Question

Discuss two relevant characteristics of capital which help in accelerating the economic development of a country.

Answer 1

a) 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.

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