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Definition of a Durable Good:
A durable good
is a good that is expected to last at least three years.
Goods are either durable or nondurable. Durable goods are separated into two categories: consumer and producer durable goods. Examples of consumer durable goods include home appliances, automobiles, boats, furniture, sporting goods, and jewelry. Producer durable goods include machinery and equipment that are used to produce goods and services. Durable goods are purchased infrequently because they are expected to last for three or more years. In contrast, nondurable goods are consumed over a short period of time. An automobile is a durable good, but the gasoline used to power it is a nondurable good. Perfectly durable goods are items that never wear out. Bricks and diamonds are examples of perfectly durable goods.
Nondurable goods include perishable goods that must be consumed shortly after they are purchased to avoid spoilage. Perishable goods include milk, fruits, vegetables, and meats. Most nondurable goods do not spoil but are normally consumed over a short period. Soap, laundry detergent, deodorant, and gasoline fall in this category. A third variety of nondurable goods include items that are used once and then disposed of. Disposable diapers and paper plates are in this category. Clothing is normally included in nondurable goods, even though clothing can last more than three years. Approximately ten percent of household expenditures in the United States are for durable goods, 30 percent for nondurable goods, and a whopping 60 percent for services.
Economists monitor durable goods sales closely because it is a leading indicator of the economy. Durable goods are typically purchased infrequently because they last. Their purchase can often be delayed during recessions. For example, a family may delay the purchase of a new car when the economy slows and it becomes concerned about its income or jobs. Conversely, car sales normally increase following an increase in consumer confidence. Likewise, manufacturers may delay purchasing new equipment if they believe their business will drop, but expand their capacity and purchase more equipment when they anticipate an increase in the demand for their good or service. Economic growth normally follows an increase in purchases of durable goods.
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