SHREE KRISHNA PRANAMI PUBLIC SCHOOL, SIWANI MANDI

(Affiliated to Central Board of Secondary Education, New Delhi)

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Assignment for class XII Subject Economics:-

There are some questions. Students are expected to read carefully, prepare yourself well before writing. Make the separate notebook for assignment of economics. These assignments are going to be evaluated. All these assignments to be finished within two days. You will find then other set of assignments to attempt.

1. What is a final good? Definition and examples

Final goods are those goods which have crossed the boundary line of production and are ready for used by final user. The good (product) does not require any additional processing. For example pen purchased by students is final goods.

Final goods can be classified into two groups: Consumption Goods and Capital Goods.

Consumption Goods: Consumption goods refer to those goods which satisfy the wants of the consumers directly. For example, Bread, butter, shirts, pens, television, furniture, etc.

Capital Goods: Capital Goods are those final goods which help in production of other goods and services. For example, plant and machinery, equipment’s, etc. How to Classify Goods as: Consumption Goods and Capital Goods: There is no clear cut line of demarcation between consumption goods and capital goods. The same good can be consumption good and also capital good. It depends on the ultimate use of the good. For example, a machine purchased by a household is consumption good, whereas, if it is purchased by a firm for use in the business, then it is a capital good. However, if the machinery is bought by the firm for resale, then it will be treated as intermediate goods.

Final good and GDP

When calculating national income and output, i.e., GDP, final goods are only new goods. GDP stands for gross domestic product.

For example, GDP does not include items that we counted in previous years. We do not want to count them twice.

When calculating GDP, the term ‘final goods’ includes not just new products, but also services.

2. What Is an Intermediate Good? An intermediate good is a product used to produce a final good or finished product—like milk can be used to make ice cream. These goods used by producers to manufacture other food products.

Intermediate goods are sold between industries for resale or the production of other goods. These goods are also called semi-finished products because they are used as inputs to become part of the finished product.

KEY TAKEAWAYS

• Intermediate goods are used in the production process to produce a final good or finished product. • Industries sell intermediate goods to one another for resale or to produce other goods. • When calculating GDP, economists use the value-added approach with intermediate goods to ensure they are not double counted. Examples of Intermediate Goods There are many intermediate goods that can be used for multiple purposes. Steel is an example of an intermediate good. It can be used in the construction of homes, cars, bridges, planes, and countless other products. Wood is used to make flooring and furniture.

Some goods are both

Some goods may be either final or intermediate goods.

Is an egg, for example, a final or intermediate good? That depends. If I buy the egg at a grocery store and eat it at home, it is a final good.

What if a baker buys an egg and uses it to bake a cake? What if the baker subsequently sells the cake to a consumer? In that case, when the baker bought the egg, it was an intermediate good. The cake is the final goods.

Now students are expected answer following questions.

Q1 Distinguish between final and intermediate goods. Give example of each.

You are expected to answer this question along with basis of classification.

Q2. How would you find whether a particular expenditure is expenditure on intermediate goods or on final goods?

Q3. “The same good may be final or intermediate.” Do you agree with the statement? Support your answer with example.

Q4. Classify the following goods into intermediate goods and final goods:

a. Milk purchased by household. b. Purchase of rice by a grocery shop. c. Purchase of an air conditioner for use in shop. d. Cloth used for making a sofa set by the carpenter.

Q5. Classify the following goods into intermediate goods and final goods:

a. Machine purchased by dealer. b. A car purchased by household.