WHAT ARE FINAL GOODS IN ECONOMICS? - ECONOMY - 2025

The final goods in economy are consumer products after processing do not require further processing for consumption. Their ultimate goal is to satisfy consumer needs.

Once manufactured by the industry, they can be used by the consumer without the need for them to be processed or modified. In a nation, the annual production of these products defines the GDP or Gross Domestic Product (an important economic indicator of the country).

Classification of final goods

Despite the fact that final goods are considered consumer goods, this classification is ambiguous. Economists have classified final goods into two large groups:

- Consumer goods

This is the classic example of final goods, where they are made for consumer satisfaction. Here two classes of goods are included, durable and non-durable.

Non-durable or immediate consumer goods

In this case, the wear is total, the product is immediately used by the consumer once the final good goes to market. A typical example of this is food or clothing.

Durable consumer goods

Here the wear is partial and occurs slowly. The final good can be used multiple times and wear out over time.

Such is the case with cars or furniture. The durability of this product is closely related to its quality and the use to which it is put.

- Capital goods

Final capital goods, unlike consumer goods, are not destined to satisfy consumer needs. On the contrary, they are used to increase the capital productive factor of the economy.

Capital goods are automatically classified as durable goods, such is the case of construction machinery, tractors, etc.

Economic activities

Three types of economic activities are established in the final goods market. The main ones that frame final goods are production and consumption activities.

In some cases, final goods can be part of accumulative activities, but these end up becoming durable consumer goods.

Productive economic activities

In productive economic activities, raw materials or intermediate goods undergo transformations that will later become final goods. The main objective is to produce the final good.

This is achieved using work as a resource, which would be the working hours used to produce the product, and capital, which would be the facilities, machinery, money to buy the raw material and everything necessary for final production.

Economic consumer activities

In consumer economic activities, the main objective is the consumption of the product, rather than its production. Final goods play an important role because it is the product that will generate income.

The consumer activity establishes the durability of the product, which is why the final goods may suffer total or partial wear and tear.

Intermediate goods

It is important to mention intermediate goods because these tend to be confused with final goods. Intermediate goods are all raw material resources that were used for the production of the final good.

For example, in the production of bread (final good), the industry needs to buy flour (intermediate good). This flour in turn derives from the processing of wheat (intermediate good).

For the production of the final good a chain of intermediate goods is required. However, economically these are different and it is extremely important to establish the differences to calculate the final cost of the product.

References

1. Arnold, RA (2008). Cengage Learning.
2. Bellido, WM (2006). Macroeconomy. An Analysis Framework for a Small Open Economy. PUCP Editorial Fund.
3. Collaborators, E. d. (February 23, 2016). Dictionary of Economics: What are final goods? Retrieved on August 18, 2017, from Dictionary of economics: dictionaryeconomia.blogspot.com
4. Pinto, A., & Freder, C. Course on economics. University Publishing House.
5. Sanfuentes, A. (1983). Economics Manual. Andres Bello.