meaning of intermediate goods: Intermediate Goods & Services Example & Definition Video & Lesson Transcript

producer items

Now, 7 tonnes coal will be taken as intermediate goods and remaining 3 tonnes coal will be treated as final goods and will be included in National Income. Such events could embody a value increase, a seasonal improve in demand, or even an impending labor strike. Therefore, the firm has prevented both excessive additional time as a result of elevated demand and hiring prices because of elevated demand. It also has averted layoff prices related to manufacturing reduce-backs, or worse, the idling or shutting down of facilities. These goods are offered between industries for resale or for the manufacturing of other goods.


Meanwhile, intermediate goods are also called producer goods or intermediate inputs. They may have a special production unit just dedicated to the making of glue. This glue is the intermediate good for the final product, i.e., a shoe.

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On the other hand, finished goods are also called final goods or consumer goods. They do not need any further processing and are ready for sale. Finished goods can be sold to other businesses or directly to individual customers.

Since these meaning of intermediate goods products can be further used in the production of other goods, they are referred to as “semi-finished products”. In other words, they become inputs in the production of another product. In this article, students will learn about what makes intermediate products different from final goods, and the examples and cost of production of intermediate goods. There are typically three options for the use of intermediate goods.

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In contrast, final goods are complete in terms of manufacturing, so they do not undergo further processing. Intermediate goods are goods which are used as a factor of production to produce goods which have the ability to satisfy wants. On the contrary, final goods are the goods which are readily available to sale, to the ultimate consumer of the product. The producers of intermediate goods, which compete monopolistically, rent capital, labor, and land from households in competitive factor markets.

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Usually durable goods are considered final goods, but the durable goods purchased by the Government for the military, such as vehicles, aircraft, trucks, etc., are considered intermediate goods. It is because these goods help in producing defense services and are not for sale in the market. Macroeconomics is a part of economics that focuses on how a general economy, the market, or different systems that operate on a large scale, behaves. Macroeconomics concentrates on phenomena like inflation, price levels, rate of economic growth, national income, gross domestic product , and changes in unemployment.

A firm may make and then use intermediate goods, or make and then sell, or buy then use them. In the production process, intermediate goods either become part of the final product, or are changed beyond recognition in the process.This means intermediate goods are resold among industries. There are normally three choices for the use of intermediate goods.

Convenience goods are those goods that are available and regularly consumed by buyers. If you went to the grocery store, you noticed all types of fruit and veggies, meats, and a complete lot of processed meals objects. If you went to a division retailer, you noticed plenty of clothes, sneakers, video games, electronics, and an entire bunch of different stuff. Consumer goods are also known as Consumption goods.Capital goods are also known as producer’s fixed assets. When economists are calculating a country’s GDP, they do not include intermediate goods. Topical articles and news from top pros and Intuit product experts.

Meaning of Intermediate Goods:-

Intermediate goods can be the ingredients used in producing goods, like the baker’s salt that makes the bread he sells to customers. These are unprocessed or semi-processed products which are used as inputs in the process, so as to be converted into another form. Hence, in the process of production, intermediate goods play a crucial role. Intermediate goods are referred to as those goods that are used by businesses in producing goods or services. Final goods are referred to as those goods which do not require further processing.


We use the term when talking about the creation of productive capacity and capital formation. If I create a great work of art, i.e., a painting, it is not rivalrous. It is not possible to ‘use it up’ so that nobody else can enjoy it.

Related Differences

In midperiod, when the shock is observed, labor inputs, and hence production of both types of intermediate goods, have already been determined. Finer distinction include raw materials, intermediate goods, inventories, ancillary operating expenses and . Intermediate goods or services used in production can be either changed in form (e.g. bulk sugar) or completely used up (e.g. electric power). However, there are other intermediate goods that regular consumers will typically not buy in their original form, such as metal or glass.

GDP is a measure of production that equals all the goods and services that a country or region produces. Although people and businesses buy intermediate and capital goods for the production process, the two terms are different. When bakers, on the other hand, buy salt to add to their products, it is an intermediate good. After adding salt to bread, the baker then sells that bread. If you use something in the production process to make something else, which you then sell, it is an intermediate good. If you buy it for your own use, it is a consumer good.A product may be either an intermediate or consumer good, depending on who buys it.

On the Basis of Definition of Intermediate Goods, we can define Intermediate Consumption

It will help students to develop a good understanding of the types of goods in economics. To read more such interesting concepts on economics for Class 12, stay tuned to BYJU’S. Intermediate goods are not included in the calculation of a country’s GDP. The reason for not including them in the GDP is because it will lead to counting the value of the goods twice, and the norm is to count the price of final goods only once.

  • Instead, whether a good is a consumer good or an intermediate good depends upon how it’s used.
  • Here, business to consumer marketing model is used.In these, business to business marketing model is used.
  • This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional.
  • Therefore, there is no definite rule regarding which products can be intermediate.

Intermediate goods, producer items or semi-finished merchandise are items, such as partly finished items, used as inputs within the production of other goods including last goods. This is as a result of the makers of the product are accomplished engaged on it. There isn’t any extra processing that must be accomplished or adjustments that must be made to the product. So, it should be noted that distinction is made on the premise of end use.

Intermediate goods are sold between industries for resale or the production of other goods. These goods are also called semi-finished products because they are used as inputs to become part of the finished product. See, If I explain it in very simple words, intermediate consumption is the expenditure incurred by production units in purchasing the intermediate goods during a given period of time. Intermediate goods are goods that are used by a business in the production of goods or services.

Similarly, a soft drink manufacturer may not choose to produce corn syrup for its consumption. Corn syrup is an intermediate good that is produced using corn by another manufacturer. In terms of industrial usage, goods that are used by firms as capital formation or investment such as machines produced from one firm and purchased by another for which it is a final product. GOODS and other goods, such as fuel and lubricants, that are used as FACTOR INPUTS in the production of other products, as opposed to being sold directly to consumers. Consumer goods are products that consumers buy and consume. A capital good differs from an intermediate good, even though we use both to make something else. A baker’s oven is a capital good because it is necessary in the production of bread. An intermediate good is simply a good that is used by a business to produce consumer goods or provide services to consumers. Many goods can be both consumer goods and intermediate goods.

Advertising expenditure incurred by Airtel on promotion of Its products. Intermediate Consumption is an important concept of value added method topic in National Income chapter of Macroeconomics class 12 CBSE Board. Suppose X Ltd. purchases 10 tons coal in 2011 for making glasses.

Intermediate goods refer to those goods which are used either for resale or for further production in the same year. Final goods refer to those goods which are used either for consumption or for investment. Non-durable goods are goods with small shelf life and are to be consumed as soon as possible. Services are intangible, as they cannot be physically touched, but they provide satisfaction to the buyers. For example, salon services, automobile repair services, etc.

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