Which among the following are final goods and which are intermediate goods? Give reasons.

(a) Milk purchased by a tea stall.

(b) Bus purchased by a school.

(c) Juice purchased by a student from the school canteen.

OR

Given nominal income, how can we find real income? Explain.

(a) Intermediate goods

Intermediate goods are those goods which would be continued to be used in the production process. It is further processed before being sold as the final good in the market. Since the milk purchased by a tea stall involves further processing before it is sold as tea or coffee, it is considered as an intermediate good.

(b) Final goods

Final goods are those goods which are purchased for final consumption. They are not meant for resale and is not processed further. It is sold as the final good to meet the needs and requirements of the consumers. Thus the bus purchased by the school can be considered as a final good.

(c) Final good

Final goods are those goods which are purchased for final consumption. They are not meant for resale and is not processed further. It is sold as the final good to meet the needs and requirements of the consumers. Thus the juice purchased by students can be considered as a final good as they are purchased for the final consumption.

OR

Nominal income is the money value of the final goods and services measured at the current year prices. Thus, it is also called national income at current prices. It is measured according to the prices prevailing in the current period in which the commodities and services were produced.

Real income is the money value of the final goods and services measured at the base year prices. The base yea is any pre-determined year that is considered as the basis for computation of national income. It is also called national income at constant prices. It depicts the real growth in national income over the period of time.

Nominal income is converted into real income by constructing index numbers for the base yeas and the current year. Real income can be found from nominal income using the following formula:

Real income = (Nominal income/ Index number for the current year)*100