miller. The hotelier makes idli, dosa and husk is used as a fuel by him. The hotel owner, by using rice and husk, makes out Rs. 5000 from the sale of idli, dosa.

Goods such as paddy, rice and husk in this example are at the intermediary stages. They are not being used by the final consumer. They are used as inputs to make the final good, which in this example is idli and dosa. If one were to add the value of all the physical inputs in between plus the value of the final goods, we would be double counting. The value of final goods already includes the value of all the in between or intermediate goods that are used in making the final good. At each stage, the producer paid for these inputs produced by someone before. Hence, the value of Rs. 5000 worth of hotel items sold by hotelier (final good) already includes Rs. 3600, the value of rice and husk used as physical inputs. This was not made by the hotelier but he only purchased them from the rice miller. Similarly, the rice and husk produced by the miller at Rs. 3600 already includes the value of physical input paddy (Rs. 2500) purchased by him. He did not produce paddy. The farmer produced this in stage 1. To count the value of the rice and paddy separately means counting the value of the same things a number of times - first as paddy, then as rice and husk and finally as idli and dosa.

The good becomes final if it is not used further in producing goods to be sold. In the above example, if the rice had been bought by a family for their consumption, this would be the final point. Idli and dosa would be made by the family for themselves and not as goods to be sold.