EBK ECONOMICS
EBK ECONOMICS
13th Edition
ISBN: 8220106799642
Author: PARKIN
Publisher: PEARSON
Question
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Chapter 21, Problem 1SPA
To determine

Classify the given items as final good or service or as an intermediate good or service.

Expert Solution & Answer
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Explanation of Solution

The final goods are those used either for final consumption or for capital formation.  On the other hand, the goods that are used in producing the final goods and services are called the intermediate goods.

  • Airline ticket bought by a student: The airline ticket is used for airline flights. Thus, the airline ticket is an intermediate good. This is part of the consumption expenditure.
  • New airplanes bought by southwest Airlines: The purchase of a new airplane can be treated as a final good. This is part of the investment expenditure.
  • Cheese bought by Domino’s: The Domino’s is one of the pizza shops in the market. Therefore, they purchase cheese for preparing pizzas. Thus, it is an intermediate good. This is part of consumption expenditure.
  • Purchase of a new phone: The purchase of a new phone is a final good. This is part of consumption expenditure.
  • New house bought by Bill Gates: The purchase of a new house is final good. This is part of an investment expenditure.

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