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TL;DR: Intermediate goods are inputs like raw materials or semi-finished items that are transformed into final products. They determine cost structures, value addition, and GDP treatment in manufacturing.
What are Intermediate Goods?
Intermediate goods are raw materials or semi-finished products used in the production of other goods. They are not sold for direct consumption but are transformed into final outputs.
How Intermediate Goods Work
They pass through multiple production stages, adding value at each step until a finished product is ready for sale.
Categories of Intermediate Goods
Internally consumed production inputs
Inputs sold to other manufacturers
Inputs used to create further intermediate goods
Key Characteristics
Consumed or transformed during production
Demand depends on final goods demand
Value is embedded in the final product
Examples
Steel, glass, cotton, wheat, paint, hardware fittings, mechanical parts, and production-related services.
Intermediate vs Final Goods
Classification depends on usage, not the item itself.
Intermediate vs Capital Goods
Intermediate goods are consumed; capital goods enable production over time.
Intermediate Goods and GDP
Excluded from GDP to prevent double counting.
Managing Intermediate Goods
Effective tracking prevents stockouts and excess inventory.
FAQs
What are intermediate goods used for?
They act as inputs for producing other goods.
Can one product be both intermediate and final?
Yes, depending on usage.
Are services intermediate goods?
Yes, when used in production.
Why are intermediate goods excluded from GDP?
To avoid double counting.
How do manufacturers manage them?
Through inventory planning and production tracking.
