An intermediate good or consumer good is a product that is used to produce finished goods or products. Some intermediate goods can be directly used without further processing in the industry to make another product or the same goods can be used for producing another good. For example, salt can be used directly by the consumers or it can be further processed by different industries to make other products such as in the glass manufacturing industry.
Since these intermediate 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.
Final Goods vs Intermediate Goods
In terms of customer consumption, final goods are those goods that are purchased for consumption such as milk. Although milk can be industrially processed to make other products such as curd or sweets as a final good, milk is used for consumption.
Examples of Intermediate Goods
It is to be noted that intermediate goods are not the same as capital goods. Machinery, land or tools that are used as factors of production are regarded as capital goods. Capital goods are not included in the final product but intermediate goods can be included in the final product.
In building a house, the radial saw used to cut wood is a capital good while the plywood used in the flooring is an intermediate good. The house is the final product.
Intermediate goods are the links between the raw materials and the final products in a production process. They are also seen as inputs. Therefore, these goods have an additional value that cannot be classified with raw materials.