Chapter 5, Problem 1SQP

(a)

To determine

Classify the goods and services as final goods and services or intermediate goods and services.

Explanation of Solution

Hair cut purchased from the hair salon is a final services. The reason is, for the hire cutting, this is the final or ultimate service the consumer can available.

Economics Concept Introduction

Final goods: These goods are not used as raw materials for the production of other commodities during the accounting year.

(b)

To determine

Classify the goods and services as final goods and services or intermediate goods and services.

Explanation of Solution

A new automobile is a final good and it can be go for ultimate consumption by the consumer or this can consumed and utilized directly by the consumers themselves.

Economics Concept Introduction

Final goods: These goods are not used as raw materials for the production of other commodities during the accounting year.

(c)

To determine

Classify the goods and services as final goods and services or intermediate goods and services.

Explanation of Solution

Purchase of oil filter in a new automobile is an intermediate good. It is consumed along with the automobile and oil filter cannot use alone.

Economics Concept Introduction

Intermediate goods: These goods may be used as raw materials for the production of other goods during the accounting year.

(d)

To determine

Classify the goods and services as final goods and services or intermediate goods and services.

Explanation of Solution

Crude oil is an intermediate goods, because it is considered as a raw material and it cannot used alone.

Economics Concept Introduction

Intermediate goods: These goods may be used as raw materials for the production of other goods during the accounting year.