Intermediate Good Definition
Intermediate goods refer to items or materials that are final products, but they can be used to process other consumer goods. Intermediate goods can be resold to manufacturers so that they can use them to produce other goods. A good example is sugar. It is a final product that you can consume directly, and at the same time, manufacturers can use it to process other food products. Another term for intermediate goods is semi-finished or producer goods.
A Little More on What is an Intermediate Good
Intermediate goods are essential products to the production process, the reason why they are also referred to as producer goods. So, industries may trade these products among themselves either to produce other goods or resale.
Note that a product can be a consumer or an intermediate depending on who is purchasing and for what reasons. When a manufacturer purchases them for use in a production process, they become intermediate goods because the processing transforms them into another state.
For instance, if you purchase sugar for your family to consume, it becomes a consumer product because that will be the end of it. However, if a baker buys the sugar to add to his or her product such as bread, then it becomes an intermediate product. Note that this is not the end of the journey for this sugar because after using in bread making, the bread is sold to consumers now as the final product.
Services as Intermediate Products
It is worth noting that services can also take the form of intermediate goods. A good example is a person offering photography services. In this case, photography as a service becomes an intermediate good while the photographs become the consumer product (final product) in this service.
Intermediate Goods vs. Consumer Goods
A consumer good is usually for use or consumption, and that will be the end of that particular product. It means that a person that buys a consumer product does not sell it or use it to produce something else.
With intermediate goods, they can still be used to process other consumable goods, even though in their current form, they are still consumable products. A person or a business can purchase intermediate products to use them in making another consumable good.
Examples of Intermediate Goods
Sugar- This product can be a consumer product when purchased in a supermarket for consumption at home. It becomes an intermediate product if sold as input to be used as an ingredient in processing other food products.
Salt- It is a common consumer product in all homes. However, most food manufacturers also use salt to process the majority of their food products.
Car engines- As much as some car manufacturing firms make their own care engines, they also sell them to other car manufacturing companies who purchase and use them on their cars.
The gross domestic product is an economic instrument for measuring all of the final goods and services’ market value in an economy. Note that economists do not put into consideration the intermediate goods during gross domestic product (GDP) calculation. The reason for not factoring in the GDP is that there are high chances of counting twice.