Factors Of Production – Capital JSS1 Agricultural Science Lesson Note

CAPITAL

Definition:  Capital includes all man-made productive assets which are used in production. In other words, these are assets made by man to enable him to produce goods and services.

Features of Capital

(i)     Capital is also a factor of production.

(ii)    Examples of capital include hoe, cutlass, tractor, farm building, cash in hand, plough, etc.

(iii)   It can depreciate or appreciate.

(iv)   Sources of capital include personal savings, banks, government agencies, cooperative societies, etc.

(v)    The reward for capital is interest.

(vi)   It is a stock of assets used in production.

(vii)  It is used to purchase farm inputs, e.g., seeds, and agro-chemicals used as working capital.

(viii) It is used to acquire other factors, e.g., land and labour.

(ix)   It is obtained in the form of loans or subsidies.

(x)    Capital is grouped into two classes:

(a)    Fixed Capital: These are capital or assets purchased for continuous use in production. In other words, these are items or materials which are not used up during production. Examples of fixed capital include farm building, motor vehicles, farm tools and implements, land furniture and fittings, incubators, plows, harrows, tractors, milking machines, feeders, drinkers, hoes, irrigation equipment, etc.

(b)   Working or Variable Capital:  These are capital or assets that are used up during the process of production. Examples include water, feeds, drugs, cash in hand, vaccines, litter, fertilizers, seeds, chemicals, etc.

Importance of Capital in Agricultural Enterprise

(i)                 Working capital is used in the day-to-day running of the farm enterprise.

(ii)              Working capital is used for paying wages.

(iii)            Working capital is used for the purchase of farm inputs, maintenance services on the farm, and feeding of livestock, etc.

(iv)             Fixed capital in the form of immovable houses and farmsteads provide shelter for farm operations.

(v)               Fixed capital in the form of machinery provides farm power for farm operations.

(vi)             Fixed capital is used to generate more funds and the success of farm enterprises usually depends on the maximum use of these capital assets.

(vii)          Working capital helps to facilitate farm expansion or increase in farm size.

(viii)        Capital is used to establish farm enterprises.

Questions       

1,  What is capital?

2. State two types of capital.
3. State five features of capital.