Intermediate Good - Overview, Categories, Examples

An intermediate good refers to a partially finished good that is then used in the production of other goods to become final goods. · In order to ... Home›Resources›Knowledge›Economics›IntermediateGoodIntermediateGoodApartiallyfinishedgoodthatisthenusedintheproductionofothergoodstobecomefinalgoodsUpdatedMarch2,2021WhatisanIntermediateGood?Anintermediategoodreferstopartiallyfinishedgoodsthatarethenusedasaninputtontheproductionofothergoodsthatbecomefinalgoods.Intermediategoodsareanintegralpartoftheproductionprocess,andassuch,theyarealsoknownasproducergoods.Whenusedintheproductionprocess,theintermediategoodwillbetransformedintoanotherproducteitheranotherintermediategoodorafinalgoodsoldtotheenduser.  SummaryAnintermediategoodreferstoapartiallyfinishedgoodthatisthenusedintheproductionofothergoodstobecomefinalgoods.Inordertodistinguishwhetherintermediategoodsaresoldassecondaryintermediategoodsorasconsumergoods,onewouldneedtoconsiderwhothebuyeris.Intermediategoodscanbeinformallycategorizedintothreemaincategories:inthefirst,theyareproducedandimmediatelyusedbythemanufacturertoproducefinalgoods;inthesecond,theyareproducedandsoldinitspartiallycompletedformtoothercompaniestoproducefinalgoods;andinthethird,theyaresoldtoanothercompanytoproduceanotherintermediategood. IntermediateGoodsSoldasConsumerGoodsThereisauniquecategorywhereintermediategoodscanbesoldtotheendusersintheirrawform.Examplesofsuchtypesofintermediategoods(soldasconsumergoods)wouldbesaltorsugar,whichareoftenboughtbyconsumersinthemarketplace.However,thereareotherintermediategoodsthatregularconsumers(membersofthegeneralpublic)willtypicallynotbuyintheiroriginalform,suchasmetalorglass.Inordertodistinguishwhetherintermediategoodsaresoldassecondaryintermediategoodsorasconsumergoods,onewouldneedtoconsiderwhothebuyeris. CategoriesofIntermediateGoodsIntermediategoodscanbeinformallycategorizedintothreemaincategories.Inthefirstcategory,theyareproducedandimmediatelyusedbythemanufacturertoproducefinalgoods;inthesecond,theyareproducedandsoldinitspartiallycompletedformtoothercompaniestoproducefinalgoods;andinthethird,theyaresoldtoanothercompanytoproduceanotherintermediategood.  PracticalExamplesHerearesomeexamplesofthethreecategoriesmentionedpreviously,andasyoucanimagine,intermediategoodsareoftensoldacrossdifferentindustries.Anexampleofagoodthatisproducedandthenusedbythemanufacturerasinputsintofinalgoodsmayincludecarengines.Somecarmanufacturerswillmaketheirowncustomcarenginesandthenusetheenginesasinputsintotheirautomobilesthataresold,oncecompleted,toconsumers.Therearemanyexamplesofgoodswhichareproducedandthensoldintheirpartiallycompletedformtoothercompanies,includingsteel,whichisusedinthecompletionofbuildings,bridges,cars,andtrains;woodwhichisusedinbuildinghomes,tomakefurnitureandhardwoodflooring;preciousmetalssuchasgoldandsilverusedintheproductionofjewelry,andglassusedinproducingwindows,ornaments,winebottles,andphotoframes.Finally,intermediategoodscanalsobeusedtomakesecondaryintermediategoods.Forexample,afarmergrowsflaxplantswhicharethensoldtothemiller(asanintermediategood),whobreaksdowntheflaxplanttoseparateouttheflaxseed(commonlyusedinmanytypesofhealthyfood).Theflaxseedisthenbought(asasecondaryintermediategood)byacompanythatmanufacturesgranolabarsandthensellsthefinalproductofbananachocolatechipflaxseedgranolabarstocustomersatthesupermarket. IntermediateGoodsandGDPTheroleofintermediategoodsincalculatingacountry’sGrossDomesticProduct(GDP) isaveryimportantconcept.Asareminder,GDPreferstothemeasureofproductionforacountrythatequalsallthegoodsandservicesproducedbythatcountryorregionandisafoundationalconceptinmacroeconomicsaswellasinthesocio-economicandpoliticalspheres.ItisimportanttonotethatintermediategoodsarenotincludedinGDPcalculations,andthereasonisthatdoingsowouldbe“double-counting”sincethefinalgoodswillalsobeincludedinGDPcalculations.Assuch,miscalculationsofGDPasaresultofincludingintermediategoodswouldleadtogrossoverestimateofGDP.Inasimpleexampletoillustratetheconcept,imaginethatablueberryfarminOregongrowsblueberriesandsellsthemtolocalgrocerystores,membersofthepublicwhovisitthefarminthesummertime,andajammanufacturer.Whenthefarm’sproduceiscalculatedaspartofU.S.GDP,theblueberriesthatitsoldtothepublicwillbeincludedintheGDPcalculation,whiletheblueberriessoldtothegrocerystoresandthejamfactorywillnotbe.ThisisbecausethegrocerystoresandjammanufacturerswillbesellingtheproducttotheendcustomerswhichwillbeincludedintheGDPcalculation,otherwisetherewouldbeasituationofdouble-counting. ServicesasanIntermediateGoodItshouldalsobenotedthatservicescanalsobeconsideredintermediategoods.Forexample,inaphotographybusiness,theserviceprovideddevelopingphotographsisconsideredtheintermediategood,whilethephotographsthemselvesareconsideredthefinalgood.Otherservice-orientedbusinessescanalsobeclassifiedasintermediategoodssuchascleaning,landscaping,publictransportation,banking,andinsuranceservices. LearnMoreCFIistheofficialprovideroftheglobalCommercialBanking&CreditAnalyst(CBCA)™certificationprogram,designedtohelpanyonebecomeaworld-classfinancialanalyst.Tokeepadvancingyourcareer,theadditionalCFIresourcesbelowwillbeuseful:Fast-MovingConsumerGoods(FMCG)GDPFormulaMacroeconomicsVeblenGoodFinancialAnalystCertificationBecomeacertifiedFinancialModelingandValuationAnalyst (FMVA)®bycompletingCFI’sonlinefinancialmodelingclasses!SharethisarticleCorporateFinanceInstituteBacktoWebsite0searchresultsfor‘’Peoplealsosearchfor:excelFreefreecoursesaccountingBalancesheetDCFIRRExploreOurCertificationsFinancialModeling&ValuationAnalyst(FMVA)®LearnmoreCommercialBanking&CreditAnalyst(CBCA)™LearnmoreCapitalMarkets&SecuritiesAnalyst(CMSA)®LearnmoreCertifiedBusinessIntelligence&DataAnalyst(BIDA)™LearnmoreResourcesExcelShortcutsPCMacListofExcelShortcuts Excelshortcuts-Itmayseemsloweratfirstifyou'reusedtothemouse,butit'sworththeinvestmenttotakethetimeand...FreeFinancialModelingGuideACompleteGuidetoFinancialModeling Thisresourceisdesignedtobethebestfreeguidetofinancialmodeling!Wewillbreakdownthemostimportant...SQLDataTypesWhatareSQLDataTypes? TheStructuredQueryLanguage(SQL)comprisesseveraldifferentdatatypesthatallowittostoredifferenttypesofinformation...StructuredQueryLanguage(SQL)WhatisStructuredQueryLanguage(SQL)? StructuredQueryLanguage(SQL)isaspecializedprogramminglanguagedesignedforinteractingwithadatabase....SeeAllResourcesSeeAllPopularCoursesFree!FMVA®-PrepCourses3.5hExcelFundamentals-FormulasforFinanceFMVA®-Required5.5hBuildinga3StatementFinancialModelFMVA®-Required7.5hBusinessValuationModelingPartIFMVA®-Required2.5hScenario&SensitivityAnalysisinExcelFMVA®-Required6hDashboards&DataVisualizationFMVA®-Electives11hLeveragedBuyoutLBOModelingSeeAllCoursesSeeAllRecentSearchesSuggestionsFreeCoursesExcelCoursesFinancialModeling&ValuationAnalyst(FMVA)®