Variable Capital

Variable capital is “capital assets which are used only once in the process of production, to produce other goods.”

It is also known as working capital/circulating capital. Eg  raw materials, electricity, fuel,  coal etc.

Variable Cost

The cost of variable capital varies directly with the output ie when output is nil, the variable capital will be zero. As output rises variable capital will rise and as output falls variable capital will fall.

Variable capital is directly absorbed in the process of production; therefore it is exhausted in use. However, in the production process it disappears in one
Variable capital can be completely recovered with the sale of output.use but appears in another form, shape, structure etc. in the output. Eg cotton transforms into yarn.

Tagged with:
Posted in Econleaks Answers