Intermediate good

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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 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.

Intermediate goods are not counted in a country's GDP, as that would mean double counting, as the final product only should be counted, and the value of the intermediate good is included in the value of the final good.

The use of the term "intermediate goods" can be slightly misleading, since in advanced economies about half of the value of intermediate inputs consist of services.

Examples[edit]

  • Sugar – sugar is used as a final good (when it is sold as sugar in the supermarket) or as an input (when it is used to make candy)
  • Steel – a raw material used in the production of many other goods, such as bicycles
  • Car engines - Some firms make and use their own, others buy them from other producers as an intermediate good, then use them in their own car
  • Paint, plywood, pipe and tube, and ancillary parts
  • An interesting example is the use of chlorine in the production of polyurethane, which contains no chlorine. Rock salt is electrolyzed to produce chlorine, which is reacted with carbon monoxide to give phosgene. Phosgene, a chlorine compound, and a diamine are then reacted to produce a diisocyanate and hydrochloric acid that is neutralized in situ. The chlorine is removed as chloride salt waste. The diisocyanate reacts with a diol to produce polyurethane, which contains no chlorine. Chlorine is used because chlorine is electronegative enough to produce an isocyanate, but does not become a part of the product; it lowers the atom economy.

See also[edit]

References[edit]

  1. ^ Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 301. ISBN 0-13-063085-3.