With reference to the differences between physical and human capital, consider the following statements: 1. Physical capital is intangible and cannot be sold in the market. 2. Human capital is intangible and cannot be sold in the market; only its services are sold. 3. Physical capital is inseparable from its owner, whereas human capital is separable. Which of the statements given above is/are correct?

The correct option is 2 only. Explanation Economic capital is broadly categorized into physical capital and human capital. Physical capital refers to non-human assets used in production, such as machinery and buildings. Human capital refers to the stock of knowledge, skills, and health embodied in individuals that contribute to their productivity. Statement-wise Analysis - Statement 1 is Incorrect. Physical capital is tangible in nature. It consists of material assets like tools, machines, and infrastructure that can be seen, touched, and easily sold in the market as commodities. - Statement 2 is Correct. Human capital is intangible because it is built into the body and mind of its owner. It cannot be sold in the market like a physical good; only the services of human capital (labour, expertise) can be sold or rented out. - Statement 3 is Incorrect. The statement reverses the characteristics of separability. Physical capital is separable from its owner; for example, a machine can be sold and transferred to a new owner. In contrast, human capital is inseparable from its owner; skills, education, and health cannot be transferred or separated from the individual possessing them. Key Takeaway: Physical capital is tangible, separable from the owner, and mobile across markets, whereas human capital is intangible, inseparable from the possessor, and restricted in mobility due to social or national barriers.

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

mcqmedium

With reference to the differences between physical and human capital, consider the following statements:

Physical capital is intangible and cannot be sold in the market.
Human capital is intangible and cannot be sold in the market; only its services are sold.
Physical capital is inseparable from its owner, whereas human capital is separable.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1, 2 and 3
B2 and 3 only
C1 and 2 only
D2 only

Did you get this right?

Solution

The correct option is 2 only.

Explanation

Economic capital is broadly categorized into physical capital and human capital. Physical capital refers to non-human assets used in production, such as machinery and buildings. Human capital refers to the stock of knowledge, skills, and health embodied in individuals that contribute to their productivity.

Statement-wise Analysis

Statement 1 is Incorrect. Physical capital is tangible in nature. It consists of material assets like tools, machines, and infrastructure that can be seen, touched, and easily sold in the market as commodities.
Statement 2 is Correct. Human capital is intangible because it is built into the body and mind of its owner. It cannot be sold in the market like a physical good; only the services of human capital (labour, expertise) can be sold or rented out.
Statement 3 is Incorrect. The statement reverses the characteristics of separability. Physical capital is separable from its owner; for example, a machine can be sold and transferred to a new owner. In contrast, human capital is inseparable from its owner; skills, education, and health cannot be transferred or separated from the individual possessing them.

Key Takeaway: Physical capital is tangible, separable from the owner, and mobile across markets, whereas human capital is intangible, inseparable from the possessor, and restricted in mobility due to social or national barriers.

Your note

More from Chapter 5: Human Capital Formation in India

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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?

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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?

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The correct option is 2 only.

Explanation

Statement-wise Analysis

Statement 1 is Incorrect. Physical capital is tangible in nature. It consists of material assets like tools, machines, and infrastructure that can be seen, touched, and easily sold in the market as commodities.
Statement 2 is Correct. Human capital is intangible because it is built into the body and mind of its owner. It cannot be sold in the market like a physical good; only the services of human capital (labour, expertise) can be sold or rented out.
Statement 3 is Incorrect. The statement reverses the characteristics of separability. Physical capital is separable from its owner; for example, a machine can be sold and transferred to a new owner. In contrast, human capital is inseparable from its owner; skills, education, and health cannot be transferred or separated from the individual possessing them.