Final Goods and Intermediate Goods


Final Goods

Final goods are those goods which are ready for use by their final users. Or Final goods are those goods which have crossed the boundary line of production. No value is to be added to these goods by way of further processing or resale. For example, consumption of milk or vegetables by the consumer households. Final goods are further classified as:

(i) Final consumer goods: goods which are finally used by the consumer households. Like, milk, bread, car, washing machine, as used by the consumer households.

(ii) Final producer goods: goods which are finally used by the producers/firms. Like, plant and machinery, building, as used by the firms/producers.

Final consumer goods are purchased or used by the consumers for the satisfaction of their wants. Whereas, final producer goods are purchased or used by the producers for further production.

Intermediate Goods

Intermediate goods are those goods which are not ready for use by their final users. Or Intermediate goods are those goods which are within the boundary line of production. Value is yet to be added to these goods by way of further processing or resale.

Example: Raw material purchased by one firm from the other firm for further production is an intermediate good.

Distinction between Final Goods and Intermediate Goods

The main difference between final goods and intermediate goods lies in the end-use of the good. The same good may be a final good or an intermediate good, depending on its end-use. For example, use of petrol by the consumer household is regarded as a final good. But the petrol used by some travel agency is regarded as an intermediate good.

In brief, the main differences between intermediate goods and final goods are as follow:

Intermediate Goods

Final Goods

1.

These are used for the production of other goods and services in the form of raw material.

1.

These are not used as raw materials for the production of other goods and services.

2.

These may purchased for resale.

2.

These are not purchased for resale.

3.

These goods are within the production boundary.

3.

These goods are out of the production boundary.