Theory question 103
Theory of Production(a) Define consumer goods.
(b) Explain the following forms of capital with an example each: (i) fixed capital; (ii) social capital; (iii) circulating capital.
(c) Outline three reasons for the low level of savings in a country.
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(a) Consumer goods are goods bought by households for direct satisfaction of their wants, e.g. food, clothes, furniture.
(b)(i) Fixed capital: durable producer goods used many times in production, e.g. machines, buildings, tractors.
(ii) Social capital: capital owned by the community/government for public use, e.g. roads, schools, hospitals, bridges.
(iii) Circulating (working) capital: goods used up in one round of production or held as stock, e.g. raw materials, fuel, cash for wages.
(c) Any three: low incomes; high dependency ratio/large families; inflation; poor banking habits and few banks in rural areas; low interest rates on savings; high cost of living; conspicuous consumption and social obligations; lack of confidence in banks.
Fixed capital is used again and again; circulating capital is used up.