What are final goods?

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Final goods can best be summarized as consumer products and services. They are finished products, as opposed to the resources used to make those products. Final goods can therefore be described as items that do not require further processing and are not sold to manufacture new products. The annual value of these items, when produced within a nation, is used to determine gross domestic product (GDP).

To understand the term “end goods”, a person needs to consider the process of creating all items that are used in society. Most of the items that consumers buy go through production, which often involves a series of phases. Items that are used or handled during production are known as intermediate goods.

There are many intermediate goods such as crude oil, rubber and metal. These items are often sold with the understanding that more processing will be done before they are in a state that makes them desirable to the end user. For example, the average individual does not want steel and rubber. Instead, he wants a car with tires, which are considered final goods. When an individual buys these items, he usually doesn’t use them to make new products.

One way to determine whether or not items are final goods is to consider whether they provide satisfaction. Clothing and shoes, for example, are items that people are happy to buy and are often eager to wear when they have them. The same cannot be said if these individuals had to buy raw cotton and furs, because these items would not offer pleasure until they were processed. Most retail items, therefore, can safely be considered final products.

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Final goods valuation is often important because it is used to determine GDP. A country’s GDP is an economic indicator of how the nation is doing. It is calculated by adding up the value of all final goods that a nation produces domestically within a year, regardless of the nationality of the individuals who produce it.

The Gross National Product (GDP) is another economic indicator that depends on the assessment of the value of final products and services. This value, however, is calculated differently from GDP. To determine GDP, a nation assesses the value of final goods produced by its citizens, even if production takes place in foreign countries. This value excludes the value of goods produced by foreigners.

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