NCERT Class 9 Economics — Chapter 1: The Story of Village Palampur

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Which of the following correctly explains the concept of working capital in economics?

Official previous-year question

Verified 1 Aug 2026.

Options

AThe knowledge and enterprise required for production.
BInputs that can be used in production over many years.
CInputs that are used up in production, such as raw materials and money.
DThe natural resources used in production.

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Solution

Correct Option

The correct option is

Inputs that are used up in production, such as raw materials and money.

Explanation

Production requires various inputs known as the Factors of Production: Land, Labor, Physical Capital, and Human Capital. Physical Capital is further classified into Fixed Capital and Working Capital based on the nature of its usage and durability during the production process.

Option Analysis

Inputs that can be used in production over many years. is incorrect: Inputs that can be used in production over many years, such as tools, machines, computers, and buildings, are classified as Fixed Capital. These assets are not exhausted in a single production cycle.
Inputs that are used up in production, such as raw materials and money. is correct: Working Capital refers to inputs that are used up or consumed during the production process. This includes raw materials (e.g., yarn for a weaver, clay for a potter) and money in hand required to make daily payments and buy necessary items.
The knowledge and enterprise required for production. is incorrect: The knowledge and enterprise required to combine land, labor, and physical capital to produce an output is termed Human Capital.
The natural resources used in production. is incorrect: Natural resources used in production, such as water, forests, and minerals, are categorized under Land.

Key Takeaway: Working capital consists of transient inputs like raw materials and money in hand that are consumed during production, distinguishing them from fixed capital which endures over time.

Your note

More from Chapter 1: The Story of Village Palampur

Consider the following statements regarding Physical Capital: 1. It is the variety of inputs required at every stage during production. 2. Physical capital consists only of fixed assets like machines and excludes raw materials. 3. Money in hand is considered working capital as it is used for day-to-day payments. Which of the following statements are correct ?

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Every production is organised by combining which of the following factors? 1. Land 2. Labour 3. Physical Capital 4. Human Capital

hard

Consider the following statements regarding traditional farming methods used till the mid-1960s: 1. The seeds used were traditional ones with relatively low yields. 2. Farmers relied exclusively on chemical fertilizers for traditional farming. 3. Traditional seeds required less irrigation compared to High Yielding Variety seeds. Which of the following statements are correct ?

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Which of the following is a characteristic of High Yielding Variety (HYV) seeds?

hard

Consider the following statements regarding the factors of production: 1. Tools, machines, and buildings are considered fixed capital. 2. Raw materials and money in hand are classified as fixed capital. 3. Human capital refers to the knowledge and enterprise required to put together land, labour, and physical capital. Which of the following statements are correct ?

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Correct Option

The correct option is

Inputs that are used up in production, such as raw materials and money.

Explanation

Option Analysis

Inputs that can be used in production over many years. is incorrect: Inputs that can be used in production over many years, such as tools, machines, computers, and buildings, are classified as Fixed Capital. These assets are not exhausted in a single production cycle.
Inputs that are used up in production, such as raw materials and money. is correct: Working Capital refers to inputs that are used up or consumed during the production process. This includes raw materials (e.g., yarn for a weaver, clay for a potter) and money in hand required to make daily payments and buy necessary items.
The knowledge and enterprise required for production. is incorrect: The knowledge and enterprise required to combine land, labor, and physical capital to produce an output is termed Human Capital.
The natural resources used in production. is incorrect: Natural resources used in production, such as water, forests, and minerals, are categorized under Land.