Question

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

A new car purchased by a taxi driver.

Answer 1

A new car purchased by a taxi driver is a final good.

Reasons:

• The car is not meant for resale or further processing.
• It is utilized by taxi drivers as a capital asset to provide transportation services and generate money.
• Because it is used to invest in the production process, it is classified as a final good in national income accounting.
• Investment goods, even when utilized for business purposes, are classified as final goods if they are used for more than one accounting year.