Both the forms of capital formation- physical and human are COMPLETELY the outcomes of conscious investment decisions.
Which of the following option is true in regards to the above statement?
Answer & explanation
Correct answer: option 3
The ownership of physical capital is the outcome of the conscious decision of the owner — the physical capital formation is mainly an economic and technical process. The entrepreneur possesses knowledge to calculate the expected rates of return to a range of investments and then rationally decides which one of the investments should be made. A substantial part of the human capital formation takes place in one’s life when she/he is unable to decide whether it would maximise her/his earnings. Children are given different types of school education and health care facilities by their parents and the society. Human capital formation is partly a social process and partly a conscious decision of the possessor of the human capital.