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Question : 21
Total: 52
(i) "Many goods and services which may contribute to welfare, but are not included in estimating Gross Domestic Product (GDP)."
Do you agree with the given statement? Give valid reason in support of your answer.
(ii) With suitable examples, distinguish between final goods and intermediate goods.
Do you agree with the given statement? Give valid reason in support of your answer.
(ii) With suitable examples, distinguish between final goods and intermediate goods.
Solution:
(i) Yes, I do agree with given statement. There are many goods and services which may contribute to welfare but are not included in GDP. These are as follows:
1. Positive Externalities: These are positive impacts of an activity without paying price for that. For e.g., beautiful garden made by neighbour. It adds to welfare of neighbourhood but GDP does not take it into account.
2. Non-Monetary Exchanges: There are transactions for which no money is paid. For e.g., A mother teaches her child. It adds to welfare but not included in GDP.
3. Transfer Payments: These are one-sided payment for which there is no value addition in the economy. Still, they add to welfare of people. For e.g., old age pension.
(ii)
1. Positive Externalities: These are positive impacts of an activity without paying price for that. For e.g., beautiful garden made by neighbour. It adds to welfare of neighbourhood but GDP does not take it into account.
2. Non-Monetary Exchanges: There are transactions for which no money is paid. For e.g., A mother teaches her child. It adds to welfare but not included in GDP.
3. Transfer Payments: These are one-sided payment for which there is no value addition in the economy. Still, they add to welfare of people. For e.g., old age pension.
(ii)
| Basis of Difference | Final goods | Intermediate goods |
|---|---|---|
| Meaning | Those goods which have crossed the boundary line of production and are ready to use by their final users. | Those goods which have not yet crossed the boundary line of production and are used as raw material for production of other goods. |
| Inclusion in National Income | Value of final goods are included in estimation of National Income. | Value of intermediate goods are not included in estimation of National Income. Because its value is included in value of final goods. |
| Example | Milk purchased by a household. | Milk purchased by baker for making biscuits. |
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