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Distinguish Between Final Goods and Intermediate Goods. Give an Example of Each. - Economics

Distinguish between final goods and intermediate goods. Give an example of each.

Explain with the help of an example, the basis of classifying goods into final goods and intermediate goods.

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Solution

Classification of goods into final and intermediate goods:

Final goods are those goods which will not pass any more stages of production process
and are ready for use by their final users. Consumers and producers are the final users. On
the other hand, goods which are within the boundary line of production, still the value is yet to add to these goods and are not available for use by their final users are called intermediate goods. These goods are consumed by another firm and are used as intermediate goods in the production process or for further sale. For example, papers purchased by Newspaper agency for printing news are intermediate goods. Value of intermediate goods is merged with the value of final goods. Here the value of an intermediate good is not included in the estimation of national income.

Concept: Basic Concepts - Final Goods
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