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Economics · 2026 · 3 marks
CBSE 2026 · Region 3 · Set 1 · Q11
(a) State the meaning and any two components of Gross Domestic Capital formation.
(a)
State the meaning and any two components of Gross Domestic Capital formation.
OR
(b)
“It is not the nature of a good, rather the economic nature of its use, which determines whether it is a final good or not.”
Justify the given statement with valid arguments.
Marking-scheme solution
Gross Domestic Capital Formation refers to addition to the capital stock which includes replacement for the wear and tear which the capital stock undergoes.
Two Components of Gross Domestic Capital Formation:
Gross Domestic Fixed Capital Formation.
Inventory Investment.
A good can be classified as a final good or not, depending on the economic nature of its use. Once a good is sold to the consumer, it crosses the production boundary and any further transformation at the hands of the producer is not possible. Although it may undergo further transformation at the hands of the ultimate purchaser but it is non-economic in nature.
However, if the same product is used for further production or resale in the same year, it will be treated as an intermediate good as value addition at any further stage is possible.
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CBSE Class 12 Economics past-paper question from the 2026 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.