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A retailer needs capital to commence business - Leaving Cert Economics - Question 3 - 2011
Question 3
A retailer needs capital to commence business. A retailer also needs to purchase stock for sale, pay wages and pay rent for premises. (i) Explain the term 'capital'... show full transcript
Worked Solution & Example Answer:A retailer needs capital to commence business - Leaving Cert Economics - Question 3 - 2011
Step 1
Explain the term 'capital' as a factor of production.
Answer
Capital refers to any man-made resource that is utilized in the production of goods and services. It encompasses financial resources, machinery, tools, and buildings that help in the manufacturing process. Essentially, capital is a critical input that businesses require in order to facilitate operations, enhance productivity, and generate profit.
Step 2
Define the terms fixed costs and variable costs.
Answer
Fixed costs are expenses that do not change regardless of the level of output. They remain constant over a specific period, regardless of how much or how little is produced. Examples include rent and salaries.
Variable costs, on the other hand, are expenses that fluctuate with the level of production. These costs increase as output goes up and decrease as production levels drop. Examples include costs of raw materials and direct labor hours.
Step 3