Given below are two statements:
Assertion (A): A capital-intensive organisation requires a higher investment in fixed assets than a labour-intensive organisation.
Reason (R): In certain industries, assets become obsolete sooner, so their replacements become due faster.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Both (A) and (R) are true but (R) is not the correct explanation of (A).
Assertion (A): A capital-intensive organisation requires a higher investment in fixed assets than a labour-intensive organisation. — True. A capital-intensive firm relies on machines more than on manual labour. So it needs a higher investment in plant and machinery.
Reason (R): In certain industries, assets become obsolete sooner, so their replacements become due faster. — True. This is technology upgradation. Assets such as computers go out of date sooner than furniture and must be replaced faster.
Why R does not explain A?
A is about the choice of technique: machines or manual labour. R is about how fast assets go out of date. Quick obsolescence raises fixed capital in any firm that uses such assets, so it does not bring about A.
The correct reason for A is that a capital-intensive organisation relies less on manual labour, so it must invest more in plant and machinery.
NCERT (2026-27 Edition): “3. Choice of Technique: Some organisations are capital intensive whereas others are labour intensive. A capital-intensive organisation requires higher investment in plant and machinery as it relies less on manual labour. The requirement of fixed capital for such organisations would be higher. Labour intensive organisations on the other hand require less investment in fixed assets. Hence, their fixed capital requirement is lower.” “4. Technology Upgradation: In certain industries, assets become obsolete sooner. Consequently, their replacements become due faster. Higher investment in fixed assets may, therefore, be required in such cases. …” |