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Intermediate Good

What is an 'Intermediate Good'

❶Goods which are used in the production process are known as intermediate goods. They also include fixed capital formation and change in stocks.

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BREAKING DOWN 'Intermediate Good'

These goods are sold between industries for resale or the production of other goods. Therefore, the value-added approach is used when calculating intermediate goods. This approach values every stage of production involved in producing a final good. Consider a farmer who grows, or produces, wheat. In this example, wheat is the intermediate good. The miller breaks down the wheat crop and uses it to make flour, which is a secondary intermediate good.

The final good, which is the good sold directly to the consumer, is the bread that the baker makes using the flour. A company may make and use their own intermediate goods. The company may also produce the goods and then sell them, which is a highly common practice between industries. Companies buy intermediate goods for specific use in creating either a secondary intermediate product or in producing the finished good.

There are many intermediate goods that can be used for multiple purposes. Consumer goods are the products purchased by the average consumer. These goods are not demanded for their own sake but for their use in producing other goods. Raw- materials and semi-finished goods are regarded as intermediate goods.

For example, raw-cotton used for the production of yarn is intermediate goods. Similarly, when yarn is sold to the owner of a textile mill for production of cloth, yarn is an intermediate goods. Thus, intermediate goods are those goods which are sold by one industry to another either for resale or for producing other goods. Final goods refer to the finished goods, which are sold in the market for consumption and investment purpose.

These goods are produced for their own sake, because these are finished product and do not undergo further processing. Final goods satisfy the wants of ultimate producers or consumers or both. Value of these goods constitutes Gross Domestic Product. Final goods may be divided into two groups — consumer goods and producer goods.

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An intermediate good is a product used to produce a final good or finished product. These goods are sold between industries for resale or the production of other goods. One example of an intermediate good is salt, a product that is directly consumed but also used to manufacture food products.

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Final Goods. Intermediate Goods. Meaning: Final goods refer to those goods which are used either for consumption or for investment. Intermediate goods refer to those goods which are used either for resale or for further production in the same year. Nature: They are included in both national and domestic income.

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Intermediate goods or producer goods or semi-finished products are goods, such as partly finished goods, used as inputs in the production of other goods including final goods. [1] A firm may make and then use intermediate goods, or make and then sell, or . Goods cannot be absolutely classified as intermediate goods and final goods. Whether a good is a final good or an intermediate good depends upon its use. For example, that part of sugar which is used in the production of biscuit is known as intermediate good.

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Use 'final good (service)' in a Sentence Schwinn uses the highest quality intermediate goods such as tires, leather seats and chains in order to produce the the best quality final good, the Schwinn Bicycle. A good or service purchased directly by the consumer, as opposed to intermediate goods and services which are required for production of other goods and services. Final goods and services are the output of production processes, and demand for these goods and services is directly determined by consumer need or preference.