Demand for Durable and Non-durable Goods

Demand for Durable and Non-durable Goods

Demand is often classified under demand for durable and non-durable goods. Durable goods are those goods whose total utility is not exhausted in single or short-run use. Such goods can be used continuously over a period of time. Durable goods may be consumer goods as well as producer goods. Durable consumer goods include clothes, shoes, house furniture, refrigerators, scooters, and cars. The durable producer goods include mainly the items under fixed assets, such as building, plant and machinery, office furniture and fixture. The durable goods, both consumer and producer goods, may be further classified as semi-durable goods such as, clothes and furniture and durable goods such as residential and factory buildings and cars. On the other hand, non-durable goods are those goods, which can be used only once such as food items and their total utility is exhausted in a single use. This category of goods can also be grouped under non-durable consumer and producer goods. All food items such as drinks, soap, cooking fuel, gas, kerosene, coal and cosmetics fall in the former category whereas, goods such as raw materials’, fuel and power, finishing materials and packing items come in the latter category.

The demand for non-durable goods depends largely on their current prices, consumers’ income and fashion whereas the expected price, income and change in technology influence the demand for the durable goods. The demand for durable goods changes over a relatively longer period. There is another point of distinction between demands for durable and non-durable goods. Durable goods create demand for replacement or substitution of the goods whereas non-durable goods do not. Also the demand for non-durable goods increases or decreases with a fixed or constant rate whereas the demand for durable goods increases or decreases exponentially, i.e., it may depend· upon some factors such as obsolescence of machinery, etc. For example, let us suppose that the annual demand for cigarettes in a city is 10 million packets and it increases at the rate of half-a-million packets per annum on account of increase in population when other factors remain constant. Thus, the total demand for cigarettes in the next year will be 10.5 million packets and 11 million packets in the next to next year and so on. This is a linear increase in the demand for a non-durable goods like cigarette. Now consider the demand for a durable good, e.g., automobiles. Let us suppose: (i1 the existing number of automobiles in a city, in a year is 10,000, (ii) the annual replacement demand equals 10 per cent of the total demand, and (iii) the annual autonomous increase ·in demand is 1000 automobiles. As such, the total annual demand for automobiles in four subsequent years is calculated and presented in Table 2.1.

Table 2.1: Annual Demand for Automobiles

Stock + Replacement + Autonomous demand = Total Demand

It may be seen from the Table 2.1 that the total demand for automobiles is increasing at an increasing rate due to acceleration in the replacement demand. Another factor, which might accelerate the demand for automobiles and such durable goods, is the rate of obsolescence of this category of goods.