Basic Concepts in Macro Economics

Classifications of Goods

Goods-Items or materials that satisfy human wants and provide utility, are called goods.

Final Goods - Final goods are those goods that have crossed the boundary line of production i.e it will not pass through any more stages of production or transformations and are ready for final use is called a final good. The final good is used either for the final consumption or for capital formation.

1-Final consumer goods are those goods which are used by the consumer for the final consumption. Example-food, clothing, car

Consumer goods are divided into four categories:

·      Durable goods

·      Semi durable goods

·      Non-durable goods

·      Services

Consumer durable goods are those goods that don’t quickly wear out and have a significant life span of three years or more than three years.

These goods are having relatively high value. Example- car, refrigerator.

Semi durable goods are those goods that can be used for one year or slightly more. These goods don’t have high value, for example-clothes, footwear.

Consumer non-durable goods are those goods that are used only once, or we can say that these goods are single used consumption goods. Example-bread.

Services are activities provided by other people and are used directly by consumers to satisfy their wants. For example- haircuts, medical treatments, for convenience we may refer to services as consumer goods.

 

2-Capital goods are the fixed assets of producers and are used for the production of other goods for several years. Capital goods are of high value. Example- plant, machinery, tools, etc. These goods themselves don’t get transformed in the production process, they only make the production of other commodities feasible. These are also called final producer goods.

All capital goods are producer goods, but all producer goods are not capital goods.

 

Intermediate goods are those goods that have not yet crossed the boundary line of production and value is still to be added to these goods. These goods are used for producing final goods or consumer goods.  Such goods are used by other producers as material inputs or raw materials. Example-Wood, steel, etc.

Basis For Comparison	Intermediate Goods	Final Goods
Meaning	These goods can be used as raw materials for the production of other goods.	Final goods are the goods that are ready for sale to the final consumer, to satisfy their wants.
Further Processing	Further processing is performed to add more value in it.	They are ready for final use as no value has to be added to it.
Usage	These goods are resold for further production.	It is used for final consumption or capital formation.
Nature	Partly-finished goods	Finished goods
Demand	Derived demand	Direct demand

Dr. Swati Gupta

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