How are final goods and services calculated? Explain through one example.

(i) The value of final goods and services produced in each sector during a particular year provides the total production of the sector for that year.

(ii) The sum of production in the three sectors gives what is called the Gross Domestic Product (GDP) of a country. It is the value of all final goods and services produced within a country during a particular year.

(iii) Not every good (or service) that is produced and sold needs to be counted.

(iv) It makes sense only to include the final goods and services. For instance, a farmer who sells wheat to a flour mill for Rs $\displaystyle 20$ per kg. The mill grinds the wheat and sells the flour to a biscuit company for Rs $\displaystyle 25$ per kg.

(v) The biscuit company uses the flour and things such as sugar and oil to make four packets of biscuits. It sells biscuits in the market to the consumers for Rs $\displaystyle 80$ (Rs $\displaystyle 20$ per packet).

(vi) Biscuits are the final goods, i.e., goods that reach the consumers. The value of final goods already includes the value of all the intermediate goods that are used in making the final good.

(vii) The value of Rs $\displaystyle 80$ for the biscuits (final good) already includes the value of flour (Rs $\displaystyle 25$).

(viii) Similarly, the value of all other intermediate goods would have been included.