An automobile engine is an example of an intermediate good, and is used in the production of the final good, the assembled automobile.
Intermediate goods, 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.[2]
This means intermediate goods are resold among industries.
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.[3]
U.S. and Chinese Trade in Goods with ASEAN Countries by Use, 2014
The value-added method can be used to calculate the amount of intermediate goods incorporated into GDP. This approach counts every phase of processing included in production of final goods.
Characterization of intermediate goods as physical goods can be misleading, since, in advanced economies, about half of the value of intermediate inputs consist of services.[4]
Intermediate goods generally can be made and used in three different ways. First, a company can make and use its own intermediate goods. Second, a company can manufacture intermediate goods and sell them to others. Third, a company can buy intermediate goods to produce either secondary intermediate goods or final goods.
^O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 301. ISBN 0-13-063085-3.{{cite book}}: CS1 maint: location (link)
^C. Colburn Hardy (1 January 1978). The Investor's Guide to Technical Analysis. Tata McGraw-Hill Education. pp. 439–. ISBN 978-0-07-026365-9. Retrieved 14 August 2017.
^Irvin Tucker (25 February 2008). Survey of Economics. Cengage Learning. pp. 219–. ISBN 978-0-324-57961-1. Retrieved 14 August 2017.
^Chandana Ghosh (2011). Macroeconomics. PHI Learning Pvt. Ltd. pp. 27–. ISBN 978-81-203-4306-1. Retrieved 14 August 2017.
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