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NATIONAL INCOME| Production Boundary| Intermediate Goods and Final Goods| Macroeconomics Class 12 - YouTube
Channel: Study With Versha
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so now we'll be looking at production
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boundary so
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what do you mean by production boundary
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the production boundary is a line around
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the production sector
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so so i hope the definition is clear
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the projection boundary is a line which
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is around the production
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sector so here you can see a b and c
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are production units and these units
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make a sector production sector
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so you can see a is a unit b is a unit
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and c is a unit
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so a b and c together make a production
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sector okay where the production takes
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place
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okay as a whole this as a sum a b
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and c as a sum is known as prediction
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sector okay
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so within the box the intermediate goods
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cotton and thread revolves
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so here you can see farmer a produces
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cotton worth of rupees 2000 and sells it
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to b
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okay and b produces thread worth of 3000
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and sells it to c
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and c finally produces cloth worth of
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rupees
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4500 and sells it to consumers
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okay the cotton you know the farmers are
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producing cotton
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the cat the cotton can be used for
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making clothes that we are wearing
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we usually wear cotton clothes only so
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the
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farmer is taking the cotton and giving
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it to
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uh b for making yarn or for making
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thread
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the thread will be only used for making
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clothes finally okay
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as you can see farmer a and b they
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remain in the production boundary
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because they
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their work is not to make clothes but
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just to provide the materials which will
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help in
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producing the clothes a is providing the
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cotton and b is providing the thread but
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c is only making the final product which
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is the
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t-shirt which is the cloth the final
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cloth which we will
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wear okay so that is why a and b will
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remain in the production boundary
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whereas c
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from the production boundary it goes to
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the consumers it
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transports to the consumer as it is
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final
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good okay it is ready for usage okay
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and the final go good goes outside the
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production sector in the hands of
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consumer okay so i hope it is clear
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intermediate goods and final goods so
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let us look at the basis and then
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differentiate between intramural goods
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and final goods
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so first is the meaning the goods which
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are
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used for further production or resell
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during the year
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so intermediate goods are type of foods
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which is used for further production
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uh now if you have something in the
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previous case let us see
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so in previous case you had a cotton and
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then it was thread it was the cotton was
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sent to b for making a thread and the
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thread was finally used for making the
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final boot which is
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cloth okay such is an example of
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intermediate good
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cotton and thread are examples of
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intermediate goods
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because it was used for further
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production of final routes okay
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so i hope this is clear and final goods
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are the goods
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which are ready for conception of a
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investment okay
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so here in the previous example you saw
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cloth
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the cloth was the final goods which we
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which were which was ready for
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conception
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because the clothes is the thing which
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we wear so it is a final good okay
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it is ready for conception so investment
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also suppose you are buying some assets
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like uh table shell building
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it is a asset it is an investment so
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those are all the final goods now you
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can't add any value for ready-made
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or table or chair right it is a final
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good okay
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so i hope this is clear next is
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calculation
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intermediate goods are not included in
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uh national income or domestic income
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why is it not included in national
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domestic income
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let us see so in this example you saw
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so let me explain in this way
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so here intermediate goods were cotton
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and thread
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right so rupees 2 000 worth of cotton
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was
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bought and b added some value to the
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cotton and made it into thread so again
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the thread went to the c
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and c finally made it into the cloth so
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already the cotton is included in cloth
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i mean the final good
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already the thread is included in the
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cloth so why to add it again
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because the final good already includes
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of that
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already it includes the value of cotton
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already it includes the value of thread
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so why to add it again that is because
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the final good already has it okay so
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that is why you are not
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adding the intermediate goods in the
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national income
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or domestic income it lays within the
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production boundary only it is not
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included in
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national income or domestic income okay
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but final goods it is included in
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national income or domestic income okay
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because the good is ready for conception
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and it revolves around the
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economy that is why it is included in
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national income
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okay so i hope this is clear and
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production boundary
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it lies the intermediate goods lies
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within the
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production boundary it revolves around
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the production boundary only it doesn't
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go
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outside the production boundary okay but
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the final goods
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it lies both within or outside the
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production boundary okay
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as you can see here the thread is made
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into a cloth
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within this boundary and then it is
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exported
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or it is transported to the consumers
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for usage
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okay so that is why it lies both within
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and
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outside the production boundary and
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value addition
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value is added as it is not ready for
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conception
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in the previous case the cotton was
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added some value to make into thread
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and thread was also added some value to
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make into
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final boot which is cloth okay so it as
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it was not ready for conception
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the values added to make it into final
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good
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but the final goods the value is not
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added
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because the final good is like cloth you
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can't add value to it you can't
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like alter it again and make it into
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something this already a final good
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so i hope the value edition was clear
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next is example
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what is an example of intermediate good
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and final good
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so this is very interesting example many
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people like
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many students get like confused okay so
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that is why i picked
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this particular example okay for
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uh intermediate good and final okay so
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in exam it may be us
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milk now tell me if milk is a
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intermediate good or a final good so
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what will you answer
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so your answer should be milk can be
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both intermediate good and final good
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okay
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so why i will say through this example
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okay you can write this in your exam
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you can put example and then write this
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okay
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for intermediate goods milk can be used
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for making
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butter like milk has many uses it can be
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made into various
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dairy products like cheese butter ghee
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yogurt curd and everything okay so when
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you're making
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when you're using milk for making other
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products
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okay then milk is an intermediate good
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okay but when milk is used for
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conception you also drink milk
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directly right it is ready for
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conception also
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like when you wake up in the morning
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your mom gives you milk to drink
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so that is an example of final good
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because it is directly
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taken it is directly consumed so in that
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case
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milk becomes a final good okay you
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because you're not
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adding any value there but for here when
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you're making a butter
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the value the process is you milk goes
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through some process
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then it becomes an intermediate goal but
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else wise if it is just
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for conception then it is a final good
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so i hope this concepts were clear so
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that's it for today
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so thank you
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