Labour And Capital
In ordinary sense labour is very often used to represent hard work or manual labour. But in economics the term 'labour' is used in much wider sense. It includes both physical and mental work undertaken for some monetary reward.
Labour can be defined, "as any exertion of the body or mind undertaken wholly or partly with some object other than the pleasure derived from the labour itself. Labour includes all the efforts made by man to earn a living. Labour refers to all human efforts of body or mind, undertaken in the expectation of reward."
This means any work whether mental or manual undertaken for monetary reward is labour in economics.
Labour has the following peculiarities which are explained as under-
1. Labour is perishable- if a worker does not work on particular day, his labour for that day is wasted. Labour is thus perishable.
2. An active factor- land and capital are passive factors, but labour is an active factor of production. Neither land nor capital can yield much without labour.
3. Weak bargaining power- the bargaining power of labour is weak because (i) the economic position of the worker is much weaker than that of the employer, (ii) there is lack of organization among workers and (iii) labour is perishable.
4. Supply of labour is inelastic- the supply of labour can neither be increased nor be reduced easily and quickly. Hence, for example if there is dearth of particular type of labour in a country, there supply cannot be increased within a day, month or year.
5. Labour are both a means and an end- labour is not only a means of production but also an end of production because he is the producer and also the consumer of the products.
6. Labour sells his labour, but not himself- the labour does not sale he, he sells his labour only.
7. Less mobile- the labour being human beings have much attachment to the language, religion, culture and custom etc. and consequently they do not move out so easily.
8. Difficulty of calculating cost of production- it is not easy to calculate the cost of production of the labors. How can the cost of bringing up children be calculated?
9. Indirect demand for labour- the demand for labour is not direct; it is indirect or derived demand. Labour is demanded so as to produce other goods which satisfy our wants.
10. Different in efficiency- all workers are not equal. They are different in efficiency.
11. Efficiency of the labour can be increased- the efficiency can be increased through training.
Capital may be defined as that part of man's savings by which he expect to earn income. Thus that part of wealth is Capital which used in business for further increase of wealth. Capital consists of those kinds of wealth rather than free gifts of nature which yield income. Capital is produced means of production. Capital is the accumulated product of past labour destined for the production of further wealth. Capital is that wealth which yields an income or aids the production of income or is intended to do so.
In short, capital includes all man-made physical goods which are used for the further production of wealth.
The term capital is used in economics in various senses. In ordinary language and sometimes in economics also capital is used in the sense of money. But when we talk of capital as a factor of production to confuse capital with money is quite wrong. Of course money is used to purchase velour factor such as raw materials machinery labour which is available for investment and productive purposes has been called money captivator financial capital by some economists. But money capital is not the real capital the real capital consists of machinery tools tube well. Factories tractors etc. which directly assist in the production of goods similarly government securities and bonds shares and debenture of public limited companies do not represent real capital securities bonds stocks etc. possessed by individuals yield income to them but they cannot be called real capital because they represent only titles of ownership rather than factors of production.
Capital has been rightly defined as produced means of production this definition distinguishes capita form both land and labour because both land and labour are not produced factors land and labour are often considered as primary or original factor of production. But capital is not a primary or original factor; it is a produced factor of production capital has been produced by man by working with nature. Therefore capital may well be defined as man-made instrument of production capital thus consists of those physical goods which have produced for use in future production. Machines tool sand instrument factories canals dams transport equipment stocks of raw materials are some of the examples of capital. all of the mare produced by man to help in the production of further goods. According to proof Richard T. Gill a country capital is its stock of produced or man-made means of production consisting of such items as buildings factories machinery tools equipment and inventories go goods in stock.
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