Final answer:
Physical capital refers to factories, machinery, and infrastructure used in production, while human capital refers to the skills and knowledge of workers. Option 1 is correct.
Step-by-step explanation:
Physical capital is the category that includes factories, machinery, infrastructure (such as roads), and other equipment used by firms in the production of goods and services.
Physical capital can affect productivity by increasing both the quantity and quality of the capital. For example, having more computers of the same quality (quantity increase) or having faster computers while keeping the number the same (quality increase) can lead to higher productivity.
Human capital, on the other hand, refers to the skills and knowledge that make workers productive. Both physical and human capital accumulation through investment can result in higher productivity in the future.
Physical capital refers to the plant, equipment, machinery, and infrastructure used by firms to produce other goods and services. This form of capital greatly impacts the production output and productivity of a company, and it can be improved either by increasing the quantity of physical capital, such as having more machinery, or elevating the quality of physical capital, like upgrading to faster computers.
Investment in physical capital, similar to investment in human capital, is aimed at enhancing productivity over a period. Human capital, however, involves the development of skills and knowledge in workers, making them more efficient. Both types of capital accumulation require upfront investment that pays off through increased productivity in the future.