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What Are Final Goods?

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  • Written By: Felicia Dye
  • Edited By: O. Wallace
  • Last Modified Date: 21 December 2014
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Final goods can be best 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 for the manufacturing of 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 “final goods,” a person needs to consider the process of creating all of the items that are used in society. A large portion of the items that consumers purchase must go through production, which often involves a number of phases. The items that are used or manipulated during production are known as intermediate goods.

There are many intermediate goods, such as crude oil, rubber and metal. These items are generally 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 both considered final goods. When an individual purchases these items, he generally will not use them to make new products.

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One way to determine whether or not items are final goods is consider if they provide satisfaction. Clothes and shoes, for instance, are items that people take pleasure in buying and are usually eager to use as they have them. The same cannot be said if these individuals had to purchase raw cotton and hides because these items would not offer enjoyment until they were processed. Most retail items, therefore, can safely be considered final products.

The assessment of final goods is generally important because it is used to determine GDP. A country's GDP is an economic indicator of how well the nation is doing. It is calculated by adding the value of all of the final goods a nation produces domestically in the span of a year without regards to the nationality of the individuals doing the producing.

Gross national product (GNP) is another economic indicator that relies on the assessment of the value of final products and services. This figure, however, is calculated differently than GDP. To determine GNP, a nation assesses the value of final goods that are produced by its citizens, even if the production occurs in foreign countries. This figure excludes the value of goods produced by foreigners.

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B707
Post 2

@live2shop - GDP stands for gross domestic product. This is the total value of all products produced in a year's time in a country. GDP tells how well the country is doing in manufacturing. Some examples of final goods are toys, furniture, processed foods (like canned or frozen food, but not fresh food,like an apple), and computers.

The GNP measures the value of goods produced in our country and also what is produced by Americans in other countries. But all the items manufactured by the Chinese or Indians etc. are not counted in the GNP.

live2shop
Post 1

I'm a little confused about GDP. Are goods made only by Americans counted in the GDP? What about GNP? I see from the article that as long as the product is made in the U.S., it is still counted even if it is made by a foreigner.

I'm wondering about something like fabric. It isn't in a final form to be enjoyed as clothing etc. So is it considered a final goods?

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