The correct option is (c).
Explanation
Human capital represents the aggregate stock of skills, knowledge, expertise, health, and training embodied in a nation's population. It transforms human beings into a productive asset capable of contributing to economic growth and development.
Statement-wise Analysis:
- Statement 1 is Incorrect. Human capital is not limited to physical strength. It primarily encompasses intangible assets such as education, technical skills, professional expertise, and health status. While physical strength may be a component of labor in certain contexts, equating human capital solely to physical strength ignores the intellectual and cognitive abilities that drive modern economies.
- Statement 2 is Correct. Investment in human capital (e.g., through education, medical care, and on-the-job training) yields a return similar to investment in physical capital. Just as a factory (physical capital) generates output, a skilled and healthy workforce generates higher productivity and income, contributing to the overall economic surplus.
- Statement 3 is Correct. Human capital is considered superior to other resources like land and physical capital because it is an active factor of production. Human resources can make use of land and capital to generate value; however, land and capital are passive resources that cannot become useful or productive on their own without human intervention.
Key Takeaway:
Human capital is the active factor of production that utilizes passive resources (land and physical capital). Unlike physical capital, it includes the intangible wealth of skills and knowledge acquired through investment in education and health.