In 2015, a firm buys a new machine and hires a young technician to run it. By 2030, a new technology has arrived. Which of the following statements is correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → The machine may be obsolete, while training can reduce the technician’s depreciation and help her cope with the new technology.
A machine wears out with use and becomes obsolete with new technology. A person’s skill depreciates with ageing, and training can reduce this and help her cope.
Option (1) Both depreciate with continuous use, and continuous investment in education can reduce the depreciation of both. — Incorrect. Human capital depreciates with ageing, and education cannot reduce a machine’s depreciation.
Option (2) The machine may be obsolete, while training can reduce the technician’s depreciation and help her cope with the new technology. — Correct. Both halves match how each form of capital depreciates.
Option (3) The technician’s skill depreciates with ageing, while the machine depreciates through obsolescence but not through continuous use. — Incorrect. Continuous use of a machine does lead to depreciation.
Option (4) Continuous investment can reduce the depreciation of the machine, while the technician’s skill cannot cope with the new technology. — Incorrect. It is the other way round: only human capital can cope with new technology through investment.
NCERT (2026-27): “Box 4.1: Physical and Human Capital … Both forms of capital depreciate with time but the nature of depreciation differs between the two. Continuous use of machine leads to depreciation and change of technology makes a machine obsolete. In the case of human capital, depreciation takes place with ageing but can be reduced, to a large extent, through continuous investment in education, health, etc. This investment also facilitates the human capital to cope with change in technology which is not the case with physical capital. …” |