Final Goods And Services Flashcards, test questions and answers

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What is Final Goods And Services?

Final Goods and Services are products and services that are purchased by the end user or consumer. These goods and services are used in production processes, but are not themselves produced in the process. Examples of final goods and services include cars, clothes, food, entertainment, insurance policies, vacations, haircuts and education. The difference between final goods and services from intermediate goods is that intermediate goods are used to produce other goods or services that become part of the final product. For example, a tire manufacturer produces tires which then go to an automobile manufacturer who turns them into cars. The tires would be considered an intermediate good while the car itself would be considered a final good since it is what the consumer actually purchases. In economics, final goods and services play a major role in measuring economic growth as they represent real output within an economy. When consumers purchase more products or receive more of a service than what they did previously year over year this signifies economic growth as these transactions represent actual spending within an economy rather than investments such as stocks or bonds which can increase in value without representing any real economic activity. Final Goods and Services also have implications for taxation systems as well as for inflation rates due to their impact on GDP calculations. Inflation measures how much prices rise over time due to increases in demand for certain products or services; if there is higher demand for certain Final Goods or Services then this will increase prices of those items leading to higher inflation rates overall. Additionally taxes may be applied differently depending on whether it is being applied to Final Goods/Services versus Intermediate Goods/Services; some countries may offer tax incentives on Final Goods/Services while charging more tax on Intermediate Good/Service purchases in order to encourage consumers to purchase finished products rather than starting materials which helps keep capital within their economies rather than importing from abroad during times of need.