Physical capital represents the tangible man-made goods that help and support the production.
Inventory, cash, equipment or real estate are all examples of physical capital.
Mankiw definition from the book Economics: Capital is the equipment and structures used to produce goods and services.
Cash, real estate, equipment, and inventory are examples of physical capital.
[3] Biased on the order of solvency of a physical capital, it is listed on the balance sheet.
Physical capital is noted on the balance sheet as an asset at historical cost, not market value.
Differently, production function is an indicator of the physical relationship between the inputs and output of a firm.
The production function consists of 3 main features – Substitutability, Complementarity and Specificity.
Substitutability: By changing the number and amount of some inputs, while the others stay unchanged, we achieve the possibility, to modify the total output.
Machines and equipment's, specialized workers and raw materials or commodities are a few examples of the specificity of factors of production.
In the production function, variation in total output by varying the quantities of all inputs is possible only in the long run whereas the variation in total output by varying the quantity of single input may be possible even in the short run.