Final consumption expenditure is the important topic of National Income chapter of Macroeconomics class 12 CBSE Board.
While calculating National Income through value added method. only Final consumption expenditure or value added is considered to avoid double counting.
So, one must have expertized in recognizing expenditure on final goods.
What is final consumption expenditure in economics?
In simple words, expenditure incurred by household and producer on purchasing final goods is the final consumption expenditure.
final goods are meant for final consumption and investment.
Definition of Final Consumption Expenditure as given in Sandeep Garg Book
Final consumption expenditure refers to the expenditure on goods and services meant for final consumption and investment.
Examples of final consumption
purchase of durable and non-durable goods by households, purchase of capital goods by production unit
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What is final consumption expenditure by household?
See, all expenditure incurred by household is for final consumption. it is not going to sale or use it in further production.
Thus, all expenses of household on durable and non-durable goods are termed as final consumption expenditure.
for example:- purchase of tv, fridge, washing machine, food, electricity etc.
Note:- Household, if consume anything. It is termed as final consumption expenditure
What is final consumption expenditure by Production units?
All expenditure incurred by production units on capital goods is termed as final consumption expenditure.
for example:- purchase of machinery, furniture, computer, etc.
See, expenditure incurred by production units are termed as either final or intermediate consumption.
Read Here:- What is Intermediate Consumption in economics
What is final consumption expenditure by the General government?
It refers to the expenditure incurred by general government on various administrative services like defence, law, medical and education etc.
Government Final Consumption Expenditure = Intermediate Consumption of government + compensation of employee paid by government + Direct purchases from abroad for embassies and consulates located abroad – sales of goods and services produced by the general government.