Question

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

Answer 1

The underlying basis for classifying goods into final goods and intermediate goods is based on the fact whether the good has been purchased for 'ultimate consumption' or 'further processing'. If a goods has been purchased for ultimate consumption, say milk then it is regarded as a final good. While. if a good is purchased for 'further processing', say milk has been purchased for making curd by the firm, then it will be regarded as an intermediate good.