Assertion the value of final goods already include the value of all in...
Assertion is correct, Reason is correct but reason is not the correct explanation of assertion.
Assertion the value of final goods already include the value of all in...
Introduction:
The value of final goods and services produced in each sector during a particular year provides the net production of the sector. This is because the value of final goods includes the value of all intermediate goods that are used in making the final good. In this response, we will discuss why the value of final goods already includes the value of all intermediate goods and how the value of final goods and services produced in each sector represents the net production of the sector.
Explanation:
1. Value of Final Goods:
The value of final goods refers to the market price at which the goods and services are sold to the end consumers. It represents the total value of goods and services produced by a sector during a particular year. This value already includes the value of all intermediate goods that are used in the production process.
2. Intermediate Goods:
Intermediate goods are goods that are used as inputs in the production process to create final goods. These goods are not sold directly to consumers but are used in the production of other goods. Examples of intermediate goods include raw materials, components, and semi-finished products.
3. Value Addition:
When calculating the value of final goods, the value of intermediate goods is not counted separately. This is because the value of intermediate goods is already included in the final price of the finished goods. Each stage of production adds value to the intermediate goods, and this value is reflected in the final price of the goods.
4. Net Production:
The value of final goods and services produced in each sector during a particular year represents the net production of the sector. This is because it reflects the value added by the sector to the intermediate goods used in the production process. The net production is calculated by subtracting the value of intermediate goods from the value of final goods.
5. Example:
Let's consider the example of a car manufacturing industry. The value of the final car includes the value of all the intermediate goods used in its production, such as steel, tires, and electronics. The car manufacturing industry adds value to these intermediate goods by assembling them into a finished car. The value of the final car represents the net production of the car manufacturing industry.
Conclusion:
In conclusion, the value of final goods already includes the value of all intermediate goods that are used in making the final good. The value of final goods and services produced in each sector during a particular year represents the net production of the sector as it reflects the value added by the sector to the intermediate goods used in the production process.
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