Question

Why there is a need to make distinction between final and intermediate goods?

Answer 1

1. Final goods are goods that are meant for final use by consumers or producers. Furthermore, national income only includes the value of final goods.
2. Intermediate goods are those that are used as raw materials or for resale. Moreover, the value of intermediate goods is not included in national income.
3. If the cost of intermediate goods is It will be included in national income. This results in double counting.