Explain with the help of an example, the basis of classifying goods into final goods and intermediate goods.

The underlying basis for classifying goods into final goods and intermediate goods is based on the fact whether the good has been purchased for 'ultimate consumption' or 'further processing'. If a good has been purchased for ultimate consumption, say milk, then it is regarded as a final good. While if a good is purchased for 'further processing', say milk has been purchased for making curd by the firm, then it will be regarded as an intermediate good.