Consider the following statements regarding the depreciation of capital: 1. Physical capital depreciates with time due to continuous use. 2. Human capital depreciation cannot be reduced by any means. 3. Change in technology makes physical capital obsolete, but human capital can cope with change through investment. Which of the statements given above is/are correct?

The correct option is 1 and 3 only. Explanation Economic capital is broadly classified into physical capital (tangible assets like machinery) and human capital (intangible assets like skills, knowledge, and health). While both forms of capital are essential for production, they differ significantly in their depreciation patterns and adaptability to change. - Statement 1 is Correct: Physical capital is subject to depreciation due to wear and tear over time. Continuous usage leads to the degradation of machinery, buildings, and equipment, necessitating repairs or replacement. This is a fundamental accounting and economic concept. - Statement 2 is Incorrect: While human capital does depreciate due to aging or the erosion of skills over time, this depreciation can be reduced or managed. Investment in healthcare, continuous education, and on-the-job training helps maintain and even enhance human capital, thereby countering the natural depreciation process. It is not absolute or unmanageable. - Statement 3 is Correct: Technological advancements often render physical capital obsolete (e.g., a typewriter becoming useless in the computer age). Physical capital cannot "learn" or adapt on its own. In contrast, human capital is dynamic; individuals can acquire new skills and knowledge through investment in education and training to cope with technological changes. Key Takeaway: Physical capital depreciates through use and becomes obsolete due to technology, whereas human capital can adapt and evolve through continuous investment in education and health, making it more resilient to obsolescence.

NCERT Class 11 Economics — Chapter 5: Human Capital Formation in India

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Consider the following statements regarding the depreciation of capital:

Physical capital depreciates with time due to continuous use.
Human capital depreciation cannot be reduced by any means.
Change in technology makes physical capital obsolete, but human capital can cope with change through investment.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A2 only
B1 and 3 only
C1 and 2 only
D1, 2 and 3

Did you get this right?

Solution

The correct option is 1 and 3 only.

Explanation

Economic capital is broadly classified into physical capital (tangible assets like machinery) and human capital (intangible assets like skills, knowledge, and health). While both forms of capital are essential for production, they differ significantly in their depreciation patterns and adaptability to change.

Statement 1 is Correct: Physical capital is subject to depreciation due to wear and tear over time. Continuous usage leads to the degradation of machinery, buildings, and equipment, necessitating repairs or replacement. This is a fundamental accounting and economic concept.
Statement 2 is Incorrect: While human capital does depreciate due to aging or the erosion of skills over time, this depreciation can be reduced or managed. Investment in healthcare, continuous education, and on-the-job training helps maintain and even enhance human capital, thereby countering the natural depreciation process. It is not absolute or unmanageable.
Statement 3 is Correct: Technological advancements often render physical capital obsolete (e.g., a typewriter becoming useless in the computer age). Physical capital cannot "learn" or adapt on its own. In contrast, human capital is dynamic; individuals can acquire new skills and knowledge through investment in education and training to cope with technological changes.

Key Takeaway:
Physical capital depreciates through use and becomes obsolete due to technology, whereas human capital can adapt and evolve through continuous investment in education and health, making it more resilient to obsolescence.

Your note

More from Chapter 5: Human Capital Formation in India

"A sick labourer without access to medical facilities is compelled to abstain from work and there is loss of productivity." This statement highlights the importance of which source of human capital?

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With reference to the concept of ‘Human Capital’, consider the following statements: 1. It refers solely to the physical strength of the workforce. 2. Unlike physical capital, human capital is not perfectly mobile between countries. 3. Human capital formation is not solely a conscious decision of the possessor. Which of the statements given above is/are correct?

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Consider the following statements regarding the sources of human capital formation: 1. Social medicine refers to the use of medicine for social gatherings. 2. Preventive medicine includes vaccination. 3. Provision of clean drinking water is unrelated to health expenditure. Which of the statements given above is/are correct?

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With reference to ‘On-the-job training’ as a source of human capital, consider the following statements: 1. It may involve training workers within the firm or sending them for off-campus training. 2. Firms incur expenses on training as a charity without expecting returns. 3. Workers are often required to work for a specific period after training. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the relationship between human capital and economic growth: 1. Empirical evidence proves a clear cause-and-effect relationship from human capital growth to economic growth in developing countries. 2. Higher income causes the building of a high level of human capital and vice versa. 3. Convergence in human capital measures has not led to a convergence in per capita real income. Which of the statements given above is/are correct?

hard

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The correct option is 1 and 3 only.

Explanation

Statement 1 is Correct: Physical capital is subject to depreciation due to wear and tear over time. Continuous usage leads to the degradation of machinery, buildings, and equipment, necessitating repairs or replacement. This is a fundamental accounting and economic concept.
Statement 2 is Incorrect: While human capital does depreciate due to aging or the erosion of skills over time, this depreciation can be reduced or managed. Investment in healthcare, continuous education, and on-the-job training helps maintain and even enhance human capital, thereby countering the natural depreciation process. It is not absolute or unmanageable.
Statement 3 is Correct: Technological advancements often render physical capital obsolete (e.g., a typewriter becoming useless in the computer age). Physical capital cannot "learn" or adapt on its own. In contrast, human capital is dynamic; individuals can acquire new skills and knowledge through investment in education and training to cope with technological changes.