Difference Between Final Goods and Intermediate Goods

Q: 1. Name an Example of Final and Intermediate Goods.

Answer: One example of final good can be the milk purchased by the household for consumption. Whereas, an example of intermediate goods can be coal used in the factory for further production.

Q: 2. Why is the difference between Final Goods and Intermediate Goods Important for Measuring GDP?

Answer: The difference between final and intermediate goods is important because we need to count only the value of final goods produced in the economy and we don’t require the worth of goods manufactured in each step along the way.

Q: 3. Why are Intermediate Goods not Durable in Nature?

Answer: Intermediate goods are not durable because intermediate goods are used as raw materials and they lose their identity in the production process for the making of a new commodity.

Commerce

Difference Between Final Goods and Intermediate Goods

Reviewed by:

Dimple Tiwari

Final Goods and Intermediate Goods

Final goods are those goods that don’t need further processing. Final goods or consumer goods are manufactured with the intention of direct consumption by the end consumer. Intermediate goods are those goods that are utilized by businesses and companies for producing services or goods. These goods are also called producer goods. So, you can say that intermediate goods are utilized for producing/manufacturing consumer goods or final goods or it can be said that they act as inputs in other goods and establish the final goods as an ingredient.

Difference Between Final Goods and Intermediate Goods

To distinguish between final goods and intermediate goods we have to consider various scenarios which include as under:

On the Basis of Definition:

Final Goods	Intermediate Goods
Final goods are the goods that are manufactured to be consumed directly by the consumer.	Intermediate goods are the goods that are used for producing final goods.

On the Basis of Nature:

Final Goods	Intermediate Goods
Final goods are finished goods or products.	Intermediate goods are the goods that are half prepared and can also be denoted as partly finished goods or unfinished goods.

On the Basis of Utilization:

Final Goods	Intermediate Goods
Final goods are accessible for consumption or can also be utilised for capital formation.	Intermediate goods are accessible for reselling by the firms for producing profit.

On the Basis of Processing Needed:

Final Goods	Intermediate Goods
Final goods are ready for consumption and hence don’t need any further processing.	Intermediate goods need further processing for them to be consumed.

Based on Impact on National Income:

Final Goods	Intermediate Goods
Final goods are considered as a part of national income and so they have an impact on the national income.	Intermediate goods are not involved in the national income and hence have no impact.

Based on Demands for Goods:

Final Goods	Intermediate Goods
Final goods have immediate demand or natural demand.	Intermediate goods don’t have natural demand. The demand is consequently based on the user's likings and preferences.

We have explained the main differences between final goods and intermediate goods, and this topic is a very crucial topic for a student, especially Commerce students. We hope that you understood everything you need to know about final goods and intermediate goods.

FAQs on Difference Between Final Goods and Intermediate Goods

1. Name an Example of Final and Intermediate Goods.

Answer: One example of final good can be the milk purchased by the household for consumption. Whereas, an example of intermediate goods can be coal used in the factory for further production.

2. Why is the difference between Final Goods and Intermediate Goods Important for Measuring GDP?

Answer: The difference between final and intermediate goods is important because we need to count only the value of final goods produced in the economy and we don’t require the worth of goods manufactured in each step along the way.

3. Why are Intermediate Goods not Durable in Nature?

Answer: Intermediate goods are not durable because intermediate goods are used as raw materials and they lose their identity in the production process for the making of a new commodity.