Which of the following costs are associated with migration as a source of human capital formation? 1. Cost of transport. 2. Migration always leads to a lower cost of living. 3. Psychic costs of living in a strange socio-cultural setup.

The correct option is 1 and 3 only. Explanation Migration is considered a source of human capital formation because it facilitates the movement of labor to areas where it can yield higher returns. However, this process involves both monetary and non-monetary costs which must be weighed against the expected increase in earnings. Statement-wise Analysis: - Statement 1 is Correct: The cost of transport is a direct monetary expense incurred during the process of migration. It is the primary investment required to physically relocate from one place to another. - Statement 2 is Incorrect: Migration does not always lead to a lower cost of living. In the context of human capital formation, migration typically occurs from rural areas to urban centers or from developing to developed regions in search of better employment opportunities. In such cases, the cost of living in the migrated place is generally higher than in the place of origin. - Statement 3 is Correct: The psychic costs refer to the non-monetary psychological and emotional stress associated with living in a strange or new socio-cultural setup, away from one's home and community. In economic analysis of human capital, these psychic costs are acknowledged alongside monetary costs. Key Takeaway: Investment in migration as a source of human capital involves three main costs: the cost of transport, the higher cost of living in the destination, and the psychic costs of adapting to a new environment.

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

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Which of the following costs are associated with migration as a source of human capital formation?

Cost of transport.
Migration always leads to a lower cost of living.
Psychic costs of living in a strange socio-cultural setup.

Official previous-year question

Verified 1 Aug 2026.

Options

A1 and 3 only
B2 only
C1 and 2 only
D1, 2 and 3

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Solution

The correct option is 1 and 3 only.

Explanation

Migration is considered a source of human capital formation because it facilitates the movement of labor to areas where it can yield higher returns. However, this process involves both monetary and non-monetary costs which must be weighed against the expected increase in earnings.

Statement-wise Analysis:

Statement 1 is Correct: The cost of transport is a direct monetary expense incurred during the process of migration. It is the primary investment required to physically relocate from one place to another.
Statement 2 is Incorrect: Migration does not always lead to a lower cost of living. In the context of human capital formation, migration typically occurs from rural areas to urban centers or from developing to developed regions in search of better employment opportunities. In such cases, the cost of living in the migrated place is generally higher than in the place of origin.
Statement 3 is Correct: The psychic costs refer to the non-monetary psychological and emotional stress associated with living in a strange or new socio-cultural setup, away from one's home and community. In economic analysis of human capital, these psychic costs are acknowledged alongside monetary costs.

Key Takeaway:
Investment in migration as a source of human capital involves three main costs: the cost of transport, the higher cost of living in the destination, and the psychic costs of adapting to a new environment.

Your note

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The correct option is 1 and 3 only.

Explanation

Statement-wise Analysis:

Statement 1 is Correct: The cost of transport is a direct monetary expense incurred during the process of migration. It is the primary investment required to physically relocate from one place to another.
Statement 2 is Incorrect: Migration does not always lead to a lower cost of living. In the context of human capital formation, migration typically occurs from rural areas to urban centers or from developing to developed regions in search of better employment opportunities. In such cases, the cost of living in the migrated place is generally higher than in the place of origin.
Statement 3 is Correct: The psychic costs refer to the non-monetary psychological and emotional stress associated with living in a strange or new socio-cultural setup, away from one's home and community. In economic analysis of human capital, these psychic costs are acknowledged alongside monetary costs.