Tag: economics

Intermediate goods have a derived demand as their demand depends on demand for final goods.
On the other hand, final goods have a direct demand as they satisfy the wants directly.

A good can be an intermediate good as well as a final good, depending upon its nature of use.
For example, a car purchased by a household is a final good, whereas, It will be an intermediate good if it is purchased by a car dealer. 

Households and firms depend on each other in the circular flow of income in case of a two-sector model. Participants of the two-sector economy are households and producers.  Flow of money from producers to households as payments for the purchase of factor services has been a continuous process. So, there has been the flow of money from households to producers as payments for the purchase of consumer goods and services, This non-stop continuity of inter-sectoral flows is called 'circularity of flows'. Hence, total consumption by households is always equal to total production by the producers.

Both 'Expected Obsolescence' and 'Unexpected Obsolescence' are considered for determining the amount of depreciation- this is a false statement since only expected obsolescence is considered for determining the amount of depreciation. It has two components: loss of value of fixed assets due to change in technology and change in demand.

National wealth is not an example of flow variable. It is a stock since it is measured at a point of time. National wealth is not time dimensional. It is not measured over a specified period of time like flow. Therefore, national wealth is a stock concept.

Losses are classified as a flow variable since it is measured over a specified period of time. It is time dimensional as it is generally measured over a year.

Depreciation means loss of fixed assets overtime due to wear and tear. Depreciation is also called consumption of fixed capital. Loss of fixed assets happen on account of normal wear and tear, normal rate of accidental damages and expected obsolescence.

Final goods refer to those goods which are used either for consumption or for investment. Final goods have crossed the boundary of production and are ready for use by their final users. These goods are included in the estimation of national product or national income. Example: Bread and butter used by the consumers.