Final goods and intermediate goods are very common discussions in the business and economics worlds. These terminologies are often used interchangeably with one another, but there is an obvious difference between them. These topics are also very common discussions in some examinations. In this article, we will get to learn the complete difference between final goods and intermediate goods. Topics of this blog are:
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Definition Of Final Goods
Final goods or consumer goods refer to the goods or products that are manufactured with the aim of direct consumption by the end-users(consumers). These products actually do not require any further processing for production and for acquiring additional value. Examples of final goods are meals, clothes, stationery items, fruits, etc. are the final goods as these are directly used by the end-users or consumers for final use.
In a nutshell, final goods are goods that are outside the boundary of production and are ready for sale.
Definition Of Intermediate Goods
Intermediate goods are the goods that are used either for resale or for further production of final goods in the same year. This means that these goods act as inputs in other goods and constitute the final goods as an ingredient. So, these goods are either part of the final product, or we can say that these goods lose their identity during the conversion process.
Also, They are non-durable in nature and producers supply these products or goods to the industries for the objective of resale, after adding some value to them. Some examples of intermediate goods include salt, glass, steel, wood, etc. All these products play a crucial role in the process of production.
Final Goods Vs Intermediate Goods(Comparison Table)
| Basis For Difference | Final Goods | Intermediate Goods |
| Definition | These are the goods that are produced to be consumed directly by the consumers. | These goods are used in the production of final goods. |
| Nature | Final goods are finished goods. | They are unfinished or partially finished goods |
| Users | Final consumers | Producers or manufacturers |
| Usage | They are available for consumption or capital formation | They are available by the firms for reselling by the companies in order to generate profit. |
| Impact On National Income | Yes | No |
| Need For Further Process | Final goods do not require further processing | Intermediate goods do require further processing |
| Demand | They have inherent or direct demand | They have derived demand |
Key Differences Between Final Goods And Intermediate Goods
Since we are comparing final goods and intermediate goods, let’s have a look at the key differences between them
- Final goods or consumer goods refer to the goods or products that are manufactured with the aim of direct consumption by the end-users(consumers). On the other hand, intermediate goods act as inputs in other goods and constitute the final goods as an ingredient.
- Final goods are finished goods whose production is complete. On the other hand, Intermediate goods are unfinished or partially finished goods i.e, work in progress.
- Final goods do not undergo further process as they are already complete in the terms of manufacturing. On the other hand, Intermediate goods can undergo further reprocessing activity so as to make them ready for sale in the market.
- Intermediate goods are available by the firm in order to generate income or to make final goods. On the other hand, final goods are used for personal consumption by consumers.
- The demand for intermediate goods is dependent on the demand for final goods and so, intermediate goods have a derived demand in the market. On the other hand, final goods have direct demand.
Conclusion
With the above discussions, we can simply conclude that all the products(whether it is final or intermediate) rely on their own uses. There are some products that act both as final goods and intermediate goods such as salt and sugar. Final goods do not undergo further process as they are already complete in the terms of manufacturing. On the other hand, Intermediate goods can undergo further reprocessing activity so as to make them ready for sale in the market.
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