Question

Classify the following into an intermediate good and a final good. Give reasons for your answer.

Purchase of vegetables by a hotel.

Answer 1

Intermediate product because vegetables are used by the hotel to prepare food for further sale.

Reasons:

• The hotel utilizes the vegetables to produce meals, which are then sold to customers.
• They are not intended for the hotel's ultimate consumption but are utilized in the manufacture of goods and services (e.g., meals).
• Because they are used throughout the production process and do not persist as final products, they are categorized as intermediate goods.
• In national revenue accounting, such commodities are not included to prevent double counting.