Cotton is used in making clothes. In this example, cotton is which type of good?

Correct option is C

The correct answer is: (c) Intermediate

Explanation:

• An intermediate good is a product used to produce a final good or finished product.
• In this case, cotton is used as raw material in the production of clothes, hence it is not consumed directly by consumers but used in the production process.
• Intermediate goods are not included in GDP calculations as final goods to avoid double counting.

Information Booster:

• Intermediate goods are transformed into other goods during the production process.
• They are not counted as final goods in GDP to prevent overestimation.
• Examples include cotton (used in textile), steel (used in car manufacturing), and sugar (used in making sweets).
• Final goods are those consumed directly by consumers.
• GDP includes only final goods and services to reflect actual national output.
• Intermediate goods can be capital inputs if reused over time, but cotton is consumed in one cycle.

Additional Information:

• Giffen Good: A type of inferior good where demand increases as the price increases, due to lack of substitutes (not applicable to cotton).
• Capital Good: Goods used to produce other goods and not consumed in the process (e.g., machinery, tools), whereas cotton is consumed.
  
• Inferior Good: A good for which demand decreases as consumer income rises; cotton is not considered inferior in this context.