Intermediate Goods

Not "good" as in the moral sense, like good vs. evil. An intermediate good isn't something that's not that great, but not that bad. Like giving a homeless person a nickel.

No, we're talking goods, like goods and services. Something you make. A product.

So what about the "intermediate" part? Well, it's like it sounds. Intermediate. In-between.

An intermediate good is a product that is manufactured, but is usually not sold directly to consumers. Instead, intermediate goods are used as a part of another product...one that is larger or more intricate.

Think: car parts. Fuel lines and spark plugs and that sort of thing.

Sometimes, these get sold to regular consumers at auto parts stores. But usually, they're bought by car manufacturers and become building blocks for a larger product: the car.

Construction materials are another example. Two-by-fours. Nails. Whatever it is that goes into spackle. You don't just buy a nail and display it on your coffee table as an art item. Okay, maybe you do. But that's not typical. When you buy a nail, it's a means to an end. You're building something else, and you need a nail to hold it together. It's not the final good. It's intermediate.

A lot of food products fall into this category as well.

Think about sugar. Now, sometimes you might sit in front of the TV with a bag of sugar on your lap, spooning heaps of it into your maw. But usually it's used as an ingredient. To make cookies, say...which you'll then shovel into your maw while watching TV.

Now, you might use a lot of sugar to make the stacks and stacks of cookies you eat on a daily basis. But your consumption pales in comparison to a big-time manufacturer.

Take Hypo Industrial Confectionary Treats, Inc. It buys sugar by the ton, and turns it into millions of packages of Sweet Obesity cookies, which it ships to grocery stores around the world. The sugar itself was manufactured. Transformed from sugar cane at a factory into the white, crystally stuff you recognize. Sometimes, that just gets bagged and sent to the store, where you (as the consumer) can buy it. If that happens, it gets counted as a final good. But more of it gets shipped off to Hypo Industrial Confectionary, where it becomes an ingredient in Sweet Obesity cookies. The sugar here is an intermediate good. The cookies are a final good.