Reena stitches clothes in her house and sells them to help her family earn additional income. The cloth which she buys for this purpose will be considered as which of the following?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Intermediate good
Reena turns the cloth into clothes for sale. The cloth is used up as an input, so it is an intermediate good.
Option (1) Capital good — Incorrect. A capital good, like her sewing machine, lasts and is not transformed. The cloth is transformed.
Option (2) Intermediate good — Correct. Cloth is the raw material of the clothes she sells.
Option (3) Final good — Incorrect. A final good is not worked on again. The cloth is changed into clothes, so it is not final.
Option (4) Value good — Incorrect. There is no such term in national income accounting.
NCERT (2026-27): “2.1 Some Basic Concepts of Macroeconomics … Such goods may be used by other producers as material inputs. Examples are steel sheets used for making automobiles and copper used for making utensils. These are intermediate goods, mostly used as raw material or inputs for production of other commodities. These are not final goods. …” “2.1 Some Basic Concepts of Macroeconomics … Then there are other goods that are of durable character which are used in the production process. These are tools, implements and machines. While they make production of other commodities feasible, they themselves don’t get transformed in the production process. They are also final goods yet they are not final goods to be ultimately consumed. Unlike the final goods that we have considered above, they are the crucial backbone of any production process, in aiding and enabling the production to take place. These goods form a part of capital, one of the crucial factors of production in which a productive enterprise has invested, and they continue to enable the production process to go on for continuous cycles of production. …” |