Question

Gauhar has recently completed her fashion designing studies and started a boutique. To produce dresses for sale, she purchased various materials, including a sewing machine, fabric, buttons, and thread. These items are essential for producing the dresses. Classify the material purchased by Gauhar as Final or Intermediate goods, giving valid reasons in support of the classifications.

Hint:

Final goods are those that are ready for consumption or investment, while intermediate goods are used in the production process to create final goods.

Answer 1

The classification of goods as Final or Intermediate goods depends on whether the goods are used for further production or are ready for final consumption. 1. Sewing Machine: - Classification: Final Good - Reason: The sewing machine is a durable capital good used by Gauhar to produce dresses. It is not used for resale or further processing. Hence, it is classified as a final good. 2. Fabric: - Classification: Intermediate Good - Reason: Fabric is used as an input in the production of dresses, which is the final product. It is a part of the production process and will be transformed into finished dresses. Thus, fabric is an intermediate good. 3. Buttons: - Classification: Intermediate Good - Reason: Buttons are used as a component to make the finished dress. They are essential in the production process and are not intended for final consumption in their current form. Therefore, buttons are classified as intermediate goods. 4. Thread: - Classification: Intermediate Good - Reason: Like fabric and buttons, thread is used in the production process to make the final product, the dresses. Thus, thread is an intermediate good.