The final goods are those goods which are meant for final use and will not pass through any more stages of production or transformations. They are called final goods because once they have been sold they pass out of the active economic flow.

However, they may undergo transformation by the action of the ultimate purchaser.

In fact, many final goods are transformed during their consumption. For instance, tea leaves purchased by the consumer are not consumed in that form – they are used to make drinkable tea, which is consumed. Similarly most of the items that enter our kitchen are transformed through the process of cooking.

But cooking at home is not an economic activity, even though the product involved undergoes transformation. Home-cooked food is not sold to the market. However, if the same cooking or tea was done in hotel where the cooked product would be sold to customers, then the same items are not considered as final goods and would be counted as inputs to which economic value addition can take place.

Thus, it is not in the nature of the good but in the economic nature of its usage that a good becomes a final good.