Answer to Question #292860 in Economics for Aliya

Question

If labor and capital can be substituted for each other

in the production of both commodities, when can

we say that one commodity is capital intensive and

the other labor intensive?

Answer 1

The term "capital intensive" refers to business processes or industries that require large amounts of investment to produce a good or service and thus have a high percentage of fixed assets, such as property, plant, and equipment (PP&E).

Industries that produce goods or services requiring a large amount of labor. Traditionally, labor intensive industries were determined by the amount of capital needed to produce the goods and services. Examples of labor intensive industries include agriculture, mining, hospitality and food service.