PHYSICAL CAPITAL Meaning and
Definition
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Physical capital refers to all the tangible assets owned by an individual, business, or government entity that are used in the production of goods or services. It represents the machinery, buildings, equipment, infrastructure, and other physical resources that contribute to the production process.
Physical capital can be categorized into two types: fixed capital and circulating capital. Fixed capital comprises long-term assets that are not consumed in the production process, such as buildings, machinery, and vehicles. It is intended to be used for an extended period and contributes to the production of goods or services over time. On the other hand, circulating capital is made up of short-term assets that are consumed or turned over quickly, such as raw materials, inventory, and cash.
Physical capital plays a crucial role in increasing productivity and improving efficiency within an economy. It enables businesses to produce more output with the same amount of input, leading to economic growth. Furthermore, physical capital is essential for the development of infrastructure, transportation, and technology, which are necessary for a country's overall advancement.
Investments in physical capital are made to enhance productivity and generate income. Governments, businesses, and individuals allocate resources towards the acquisition and maintenance of physical capital to improve the production capacity and competitiveness of their operations. Efficient utilization of physical capital ensures sustainable economic growth and development in the long run.
Etymology of PHYSICAL CAPITAL
The term "physical capital" is derived from the combination of the words "physical" and "capital".
The word "physical" originates from the Latin word "physicus", which means "pertaining to nature". It evolved in Middle English to "fisique", and eventually became "physical" in modern English. It refers to anything that is related to the material world or the body, as opposed to the mental or abstract.
The word "capital" comes from the Latin word "caput", meaning "head". It initially referred to the head or top of something but later took on the meaning of "wealth or resources". In economics, "capital" specifically denotes the assets or resources - such as money, machinery, buildings, etc. - that are used in the production of goods or services.
Thus, when combined, "physical capital" refers to the tangible assets or resources used in the production process.
