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Intermediate good

Intermediate good

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Encyclopedia
Intermediate goods or producer goods are goods used as inputs in the production of other goods, such as partly finished goods. Also, they are goods used in production of final goods. A firm may make then use intermediate goods, or make 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
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

, as that would mean double counting
Double counting (accounting)
Double counting in accounting is an error whereby a transaction is counted more than once, for whatever reason. But in social accounting it also refers to a conceptual problem in social accounting practice, when the attempt is made to estimate the new value added by Gross Output, or the value of...

, as the final product only should be counted.

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

  • Sugar
    Sugar
    Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...

     - 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
    Steel
    Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...

     - a raw material used in the production of many other goods, such as bicycle
    Bicycle
    A bicycle, also known as a bike, pushbike or cycle, is a human-powered, pedal-driven, single-track vehicle, having two wheels attached to a frame, one behind the other. A person who rides a bicycle is called a cyclist, or bicyclist....

    s.
  • Car engines
    Internal combustion engine
    The internal combustion engine is an engine in which the combustion of a fuel occurs with an oxidizer in a combustion chamber. In an internal combustion engine, the expansion of the high-temperature and high -pressure gases produced by combustion apply direct force to some component of the engine...

     - 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 & tube, ancillary parts, etc.
  • An interesting example is the use of chlorine
    Chlorine
    Chlorine is the chemical element with atomic number 17 and symbol Cl. It is the second lightest halogen, found in the periodic table in group 17. The element forms diatomic molecules under standard conditions, called dichlorine...

     in the production of polyurethane
    Polyurethane
    A polyurethane is any polymer composed of a chain of organic units joined by carbamate links. Polyurethane polymers are formed through step-growth polymerization, by reacting a monomer with another monomer in the presence of a catalyst.Polyurethanes are...

    , which contains no chlorine. Rock salt is electrolyzed to produce chlorine, which is reacted with carbon monoxide
    Carbon monoxide
    Carbon monoxide , also called carbonous oxide, is a colorless, odorless, and tasteless gas that is slightly lighter than air. It is highly toxic to humans and animals in higher quantities, although it is also produced in normal animal metabolism in low quantities, and is thought to have some normal...

     to give phosgene
    Phosgene
    Phosgene is the chemical compound with the formula COCl2. This colorless gas gained infamy as a chemical weapon during World War I. It is also a valued industrial reagent and building block in synthesis of pharmaceuticals and other organic compounds. In low concentrations, its odor resembles...

    . Phosgene, a chlorine compound, and a diamine
    Diamine
    A diamine is a type of polyamine with exactly two amino groups. Diamines are mainly used as monomers to prepare polyamides, polyimides and polyureas. In terms of quantities produced, 1,6-diaminohexane, a precursor to Nylon 6-6, is most important, followed by ethylenediamine...

     are then reacted to produce a diisocyanate and hydrochloric acid that is neutralized in situ. 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
    Atom economy
    Atom economy describes the conversion efficiency of a chemical process in terms of all atoms involved . In an ideal chemical process, the amount of starting materials or reactants equals the amount of all products generated and no atom is wasted...

    .