Theory question 104
Theory of Production(a) With an example each, differentiate between: (i) consumer goods and producer goods; (ii) primary production and tertiary production.
(b) Explain the following forms of capital and give an example in each case. (i) Fixed capital; (ii) working capital; (iii) social capital
Show the model answer
(a)(i) Consumer goods satisfy wants directly, e.g. bread, clothes; producer goods are used to produce other goods, e.g. tractors, machines.
(ii) Primary production extracts resources from nature, e.g. farming, mining, fishing; tertiary production provides services, e.g. banking, transport, teaching.
(b)(i) Fixed capital: durable assets used many times, e.g. buildings, machinery.
(ii) Working capital: inputs used up in one round of production or money for running costs, e.g. raw materials, fuel, cash for wages.
(iii) Social capital: assets owned by the community/government for public use, e.g. roads, schools, hospitals.
Give a clear example for each term.