Question

State one important function of capital.

Answer 1

The importance of capital can be judged from the following:

1. It increases the productivity of land and labour.
2. Capital increases employment opportunities, particularly in those countries where labour is plentiful. To employ more and more workers, capital is necessary.
3. Capital is used to provide the necessary tools and implements to the workers for productivity purposes. It is also used to extract goods from nature.
4. Without capital, there can be no production. Capital makes possible the use of advanced modem machines in production. Moreover, no technological progress is possible without capital.