Investment in human capital yields a return just like an investment in physical capital. Justify the statement.

Physical capital is the input which is used at various stages of production of goods and services. There are two types of physical capital: fixed capital and working capital.

1. Fixed capital includes those assets which can be used over many years in the process of production like machines in factory, building, tools etc.

2. Working capital includes raw materials which will be converted into finish goods and money in hand which will be required to purchase raw material or any other item during production.

To make use of the three factors of production (land, labour, and physical capital) efficiently, we will need somebody who acquires knowledge of producing goods and services. Without human capital, Land, labour and physical capital are meaningless.

If we invest in the physical capital like in buying new technology tools for speedy production, we will yield high return by producing more goods and services but if we don’t know how to operate these new technology tools this return cannot be achieved. If we invest in human capital like in their education so that they acquire knowledge of operating modern technology tools, we will yield a high return.