Intermediate good Definition
Intermediate goods or producer goods are goods used as inputs in the production of other goods, such as partly finished goods or raw materials. 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 an economies GDP, as that would mean double counting, as the final product only should be counted.
Examples:
- 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.