Final Goods and intermediate Goods

 Concept of final and intermediate Goods 

 Final Goods

 They are those goods which are acquired for personal consumption and investment . These goods reach their final user . They remain outside the production boundary. 

 Examples . 

( a ) Wheat , furniture , cloth bread , butter , etc. , used by the consumers . 

( b ) Machines used by producers 

 ( c ) Government Services are also treated as final good in National Income Accounting . 

Feature of final goods are :

 ( a ) The value of final goods is included in the calculation of national income . 

( b ) Final goods are consumed by consumers ( called consumption goods ) or used as investment by producers ( called capital goods ) .

 ( c ) They remain outside the production boundary .

Intermediate Goods :

 They are those goods which are acquired for further production or for resale during the same year . They remain within the production boundary. 

Examples . 

Wheat purchased by a restaurant , cotton purchased by thread making mill , furniture purchased by a furniture shop for resale , cloth purchased by manufacturer of ready - made garments , etc. 

Features of intermediate Goods: 

 ( a ) The value of intermediate goods is not added in national income ( to avoid the problem of double counting ) . 

( b ) These goods are not consumed by consumers . 

( c ) They remain within the production boundary . Production boundary is an imaginary line drawn around the production sector of an economy . Within the line firms purchase each other's goods for further production .