Intermediate Goods
An intermediate good is a good used to produce a final good or finished good for the purpose of selling it to the consumers. Intermediate goods like salt can be a finished product, as it is consumed directly by consumers and can be used by producers to produce other food products.
These are sold between industries for the resale or production of other goods. These goods are also called semi-finished products as they are used as inputs to manufacture the finished product.
While calculating GDP, economists use the value-added method for intermediate goods to make sure that they are not counted twice—once when they are purchased, and once when the final product is sold.
There are normally three choices for the use of intermediate goods. A producer may produce and use their own intermediate goods. The producer may also sell them, which is most commonly practised between industries. Companies purchase intermediate goods for particular use in producing either a secondary intermediate product or in producing the finished product. Usually, all intermediate goods are either a part of the final product or are totally reconfigured during the production process.
Example, Consider a farmer who produces wheat. The farmer sells his wheat to a miller for ₹100 giving the farmer ₹100 in value. The miller further operates the wheat to make flour—a secondary intermediate good. The miller sells the flour to a baker for ₹200 and gets ₹100 in value (₹200 sale – ₹100 purchase = ₹100). The final good, which is sold directly to the buyer, is the bread. The baker sells all of it for ₹300, creating another $100 of value (₹300 – ₹200 = ₹100). The final cost at which the bread is sold is equal to the value that is added at each stage in the production process, i.e., ₹300 (₹100 + ₹100 + ₹100).
Introduction to Macroeconomics
Macroeconomics is a part of economics that focuses on how general economies, markets, or different systems that operate on a large scale behave. Macroeconomics concentrates on phenomena like inflation, price levels, rate of economic growth, national income, gross domestic product (GDP) and changes in unemployment.
“Macroeconomics is that part of economics which studies the overall averages and aggregates of the system”. – KE Boulding