Question

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

Wheat flour is purchased by a housewife.

Answer 1

Wheat flour purchased by a housewife is a final good.

Reasons:

• The flour is acquired for personal consumption by the household and is not intended for resale or for the production of goods for sale.
• As it is prepared for immediate use and will be directly consumed, it is classified as a final good in national income accounting.
• Only final goods are incorporated into national income to prevent double counting.