# Final Demand

## Definition

Final Demand or final consumption in the context of an Input-Output Model denotes the ultimate destination of goods and services used up by individual households or the community to satisfy their individual or collective needs or wants.

## Formula

Final demand might be denoted as a vector or matrix (typically using ${\displaystyle F}$ or ${\displaystyle Y}$).

### Single Region Case

In the single region case final demand is a vector and depicted as a column next to the Input-Output Matrix.

### Multi-Region Case

In the multi-region case, the global final demand a tensor, usually represented as a matrix of vectors and denoted as "Y":

{\displaystyle {\begin{aligned}Y_{i}^{pq}={\begin{bmatrix}Y_{1,1}&Y_{1,2}&\cdots &Y_{1,k}\\Y_{2,1}&Y_{2,2}&\cdots &Y_{2,k}\\\vdots &\vdots &\ddots &\vdots \\Y_{k,1}&Y_{k,2}&\cdots &Y_{k,k}\end{bmatrix}}\end{aligned}}}

with the final demand vector of domestic (country q) production in the main diagonal and direct imports to final demand from country p captured by off-diagonal vectors.

## Usage

The precise nature of final demand depends on the economic system modeled and may include:

• Consumption by Households
• Government Expenditures
• Inventories
• Capital Formation (Investment)
• Foreign Exports

Adjusting final demand is and exploring economic implications is a core element of Input-Output Analysis.

## Notes

The sum of final demand equals to GDP (=sum of final sales)

## References

• Eurostat SUT Manual

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