what is the difference between intermediate consumption and intermediate cost

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Intermediate Consumption vs Intermediate Cost

Intermediate consumption refers to the use of goods and services as inputs in the production process of a particular good or service. In other words, it is the consumption of goods and services by businesses to produce other goods and services.

Intermediate cost, on the other hand, is the cost of the goods and services used as inputs in the production process. It refers to the cost of intermediate consumption.

Differences between Intermediate Consumption and Intermediate Cost

Below are some key differences between intermediate consumption and intermediate cost:

Nature: Intermediate consumption refers to the actual use of goods and services to produce other goods and services, while intermediate cost refers to the cost of using those goods and services.

Measurement: Intermediate consumption is measured in physical terms, such as units of goods and services, while intermediate cost is measured in monetary terms, such as dollars.

Timing: Intermediate consumption occurs during the production process, while intermediate cost is incurred after the production process.

Impact on GDP: Intermediate consumption is subtracted from GDP because it is considered a production cost, while intermediate cost is included in GDP as part of the value of production.

Examples

Here are some examples to help illustrate the difference between intermediate consumption and intermediate cost:

Intermediate consumption: A bakery uses flour, sugar, and eggs to make cakes. The flour, sugar, and eggs are all examples of intermediate consumption.

Intermediate cost: The cost of the flour, sugar, and eggs used to make the cakes is the intermediate cost.

In summary, intermediate consumption refers to the use of goods and services as inputs in the production process, while intermediate cost refers to the cost of using those goods and services. Intermediate consumption is subtracted from GDP because it is considered a production cost, while intermediate cost is included in GDP as part of the value of production.

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