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Sunday, 20 May 2018

Analysis of intermediate good and final good


 
In Macroeconomics, a good is intermediate or final is decided on the basis of its end use. A good is intermediate when it is being used as raw material in the process of production for producing final good. E.g When sugar is used by household for consumption, it is final good because it is directly consumed. On other hand when sugar is used by a shopkeeper for making sweets then it would be considered as final good.

But what if you have been asked that if a household using sugar for making sweets. Your answer should not be as intermediate good. Because household will finally consume directly that sweets. Household is not a producer. His objective is not to earn profit. But in case of producer , sugar will be treated as intermediate good because sweet in this case is final good. Producer will sell that sweets for earning profit.



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