What is good in the middle?

An intermediate good is a product used to make an end or consumer good. It’s possible for intermediate goods, like salt, to also be finished goods since consumers eat them and producers use them to make other food items.

Goods used to make other goods or resell them are called intermediate goods. These items are parts of finished products, also called semi-finished products.

How Goods in the Middle Work

These goods are essential to the production process, which is why they are also known as supplier goods. These goods are sold between industries to be resold or used to make other goods. They change into a different state when used in the creation process.

Most of the time, there are three ways to use intermediate things. Someone who makes things can also use the goods that come between them. It is also possible for the producer to make the goods and then sell them. This happens a lot in many businesses. Businesses buy intermediate goods to use them to make either another intermediate good or the end good. All intermediate goods will either become part of the end product or change completely during production.

Examples of Intermediate Goods

Think about a farmer who grows wheat. The farmer gets $100 from the miller for his crop. The miller breaks down the wheat into flour, a later intermediate good. When the miller sells the flour to a baker for $200, he makes $100 ($200 sale minus $100 buy = $100). The bread is the last good that is sold straight to the customer. The baker gets $300 for everything, worth an extra $100 ($300 minus $200 = $100). When the bread is sold, the total price is $100 plus $100 plus $100, which is the value added at each process step.

Another type of service is an intermediary one. For example, a photographer’s work is both an intermediary service and a final result.

Consumer and capital goods vs. intermediate goods

Intermediate goods can be used to make other things, or people can buy them. What category it is in is based on who buys it. A person gets this, like a bag of sugar, at home. However, if a producer buys sugar to use in the production of another good, it is an intermediate good.

Capital goods, on the other hand, are things that are used to make consumer goods. In other words, they are bought to help make something. If that’s the case, the cook who makes the bread will buy an oven. Compared to wheat, that oven is a capital good because it doesn’t change form or function.

The Gross Domestic Product (GDP) and Intermediate Goods

When economists figure out GDP, they don’t consider intermediate things. GDP is a way to determine how much a country’s finished goods and services are worth on the market. There is no way to determine these things’ worth because of their circumstances.

Sugar bought by a baker to add to her candy can only be counted once when the candy is sold, not when she bought the sugar to make the candy. This method is value-added because it values all the steps to make an end product.

Unique Things to Think About

A lot of intermediate things can be used for more than one thing. One example of a middle-level good is steel. It can be used to build houses, cars, roads, planes, and a vast number of other things. Glass is used to make windows and eyeglasses, wood is used to make floors and furniture, and expensive metals like gold and silver are used to make decorations, home fixtures, and jewelry.

Conclusion

• These goods are used in manufacturing to create other goods sold to customers.
• Intermediate goods are bought and sold between industries to be resold or used to make other goods.
• Companies usually use intermediate goods themselves, sell them to other companies to make more intermediate goods, or sell them to other companies to make finished goods.
• Economists use the value-added method to ensure that intermediate goods are not counted twice, once when bought and again when the end good is sold.