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INDUCED: The general notion that changes in one variable are related to, or caused by, changes in another variable. Induced relations, especially changes in consumption expenditures are induced by changes in disposable income, are a key aspect of Keynesian economics and the multiplier effect. The alternative to an induced relation between variables is an autonomous relation, in which one variable is not related to another.
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                           INTERMEDIATE GOODS: Goods (and services) that are used as inputs or components in the production of other goods. Intermediate goods are combined into the production of finished products, or what are termed final goods. Unlike final goods, intermediate goods will be further processed before sold as final goods. Because gross domestic product seeks to measure the market value of final goods, and because the value of intermediate goods are included in the value of final goods, market transactions that capture the value of intermediate goods are not included separately in gross domestic product. To do so creates the problem of double counting. Intermediate goods are an essential part of most production activities. In modern complex economies, like that in the United States, most goods are produced using complex techniques that involve several different stages. Raw materials are extracted at one location, processed at another, transformed into parts at a third, combined with other parts at a fourth, then on and on it goes through additional processing until it ends up as a final good.For example, sand is processed into silicon chips, which are then combined with only electronic gadgetry to make computers. Trees are processed into two-by-fours, which are combined with nails, plaster, shingles, and paint to make a house. Cotton is woven into fabric, which is combined with thread and stuffing to make Wacky Willy Stuffed Amigos. Computers, houses, and Stuffed Amigos are final goods. Sand, silicon chips, trees, two-by-fours, nails, plaster, shingles, cotton, fabric, thread, and stuffing are intermediate goods. Some firms perform all production stages internally, from raw material extraction to selling the final goods. As such, they do not purchase intermediate goods. However, many firms perform only parts of the production process. They combine intermediate goods that are purchased from other firms. Intermediate goods are most important when it comes to measuring gross domestic product. The number crunchers at the Department of Commerce who are responsible for calculating GDP begin their estimation process by determining the market value of all market transactions in the economy. However, they exclude transactions that involve intermediate goods because including them means double counting, including the value of a good more than once. Suppose, for example, that Jonathan McJohnson purchases a new set of All Season MegaTread tires for his vintage 1983 OmniMotors XL GT 9000 Sports Coupe. As a card-carrying member of the household sector, he buys these tires for his personal driving enjoyment. The market value of this purchase is a consumption expenditure and is included in gross domestic product. However, suppose that OmniMotors also buys a set of All Season MegaTread tires to install on a brand new OmniMotors XL GT 9000 Sports Coupe. OmniMotors buys these tires as an intermediate good in the production of its OmniMotors XL GT 9000 Sports Coupe. This Sports Coupe, complete with All Season MegaTread tires will ultimately be sold to a satisfaction-minded consumer like Maurice Finkelstein. When purchased by Maurice, the total value of the OmniMotors XL GT 9000 Sports Coupe, including tires, is a consumption expenditures and is included in gross domestic product. Including the value of the All Season MegaTread tires in gross domestic product when purchased as an intermediate good by OmniMotors causes serious double counting. The value of the tires is part of the value of the Sports Coupe, and need not be included separately in gross domestic product.
Recommended Citation:INTERMEDIATE GOODS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2013. [Accessed: May 22, 2013].
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State of the ECONOMY
Consumer Price Index Urban
March 2013
232.773
Up slightly from January 2013 Source: BLS
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BROWN PRAGMATOX
[What's This?]
Today, you are likely to spend a great deal of time browsing through a long list of dot com websites seeking to buy either storage boxes for your computer software CDs or a set of tires. Be on the lookout for bottles of barbeque sauce that act TOO innocent.
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This isn't me! What am I?
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General Electric is the only stock from the original 1896 Dow Jones Industrial Average remaining in the current index.
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"Carpe diem! Rejoice while you are alive; enjoy the day; live life to the fullest; make the most of what you have. It is later than you think." -- Horace, Ancient Roman poet
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NORC
National Opinion Research Center
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