Final goods refer to those goods which are used either for consumption or for investment. It includes:
(a) Goods purchased by consumer households as they are meant for final consumption.
(b) Goods purchased by firms for capital formation or investment. Ex- Machinery, Land, etc.
Intermediate Goods
Intermediate goods refer to those goods which are used either for resale or for further production in the same year.
Important points about Intermediate Goods:
1. Intermediate goods remain within the production boundary : As long as goods remain within the production boundary, they are Intermediate goods and when a good come out of this boundary , it becomes a final good.
2. They have derived demand as their demand depends on demand for final goods.
3. Durbale goods like trucks , aircrafts, Vehicles etc purchased by government for military purpose are included under the category of intermediate goods as they are used to provide defense services and not for market sale .
4. Value of intermediate goods are merged with the value of final goods .
How to classify goods as Intermediate Goods and Final foods ?
The distinction between intermediate goods and final goods is made on the basis of the use of that product and not on the basis of product itself .
A commodity can be intermediate good as well as a final good depending upon its nature of use.
Example - Sugar is an intermediate good when it is used by sweet shop for making sweets . However, sugar becomes a final good if it is used by thr consumer.
" Intermediate goods are used up in the same year, if they remain for more than one year then they are treated as final goods"
0 Comments