Let’s have a look at different type of goods i.e, Final Goods and Intermediate Goods that we come across in Economics:
Different Type of Goods – Final Goods and Intermediate Goods
Final Goods are used those goods which are used for final consumption or for capital formation.
Intermediate Goods are those goods which are used as raw material in production of other goods in the same year.
Whether a good is a final good or intermediate goods it depends upon the use of the product.
For Example: A bakery buys sugar. He uses sugar in the production of cakes, cookies then it is a intermediate good for a bakery.
When a household buys a sugar, then it is considered as Final good as it is for consumption and not for sale.
Ultimately, the value of intermediate good is added into final good. Continuing with the above example, The baker buys sugar for Rs 100. And then he sells cake for Rs 500. In this example the value of intermediate good that is sugar is added in final good.
One important thing to keep in mind, if an intermediate good is not used within a year, then it is calculated as a part of final goods.
Only Final Goods are calculated as part of National Income.
Capital Goods and Consumer Goods:
Capital Goods are those goods which are used to make consumer goods and services.It is utilised by business to make goods for customers. In longer run, high demand of capital goods serves as a boast to economy.These include plant and machinery, hardware, other buildings, hardware, machines etc
Consumer Goods are those goods which help to satisfy our needs and wants directly. They are ready for sale and bought for final consumption. Example pastries, services of a barber, mobile phones etc.
They consist of durable goods and non-durable goods. Goods which are for one time use like services of barber, eating pasteries are non durable goods. Goods which can be used over a period of time are durable goods like fridge, laptop, mobile phone etc.
The purpose of a good is wht makes it a capital good or consumer good.
Example: When firm buys telephones like a call center, then it is a capital good but if an individual buys a telephone then it is consumer good as it is for self satisfaction.