Question

Differentiate between intermediate products and final products what is the significance of this distinction

Answer 1

Intermediate goods are those goods which have

1. Not crossed the boundary line of production

2. Not finished the process of value addition

3. Are not ready to use by their end users.

On the other hand, Final goods are those goods which

1. Have crossed the boundary line of production

2. Have crossed the process of value addition

3. Are ready to use by their end users

The distinction between both these goods is very significant as intermediate goods are not subjected to be added to national income but cost of final goods are added to national income because value of intermediate goods is already included in value of final goods.