Amity Assignment

Answer Durable goods are those which are used for a longer period of time. It does not wear out very quickly and works for a longer period of time. For example, television set is a durable good because it is used for a longer period of time and does not last very quickly. One the most important problem in determining the demand for television set arises from the fact that sale of television creates secondhand market not controlled by the original seller. This creates problem in the estimating the real demand for television set because the transaction in secondary market often get unreported.

The second robber associated with the determination of demand for durable goods is uncertainty regarding product replacement time i. E. The time gap after which the consumer would look for new television set. Firms are not able to analysis when the consumer would look to purchase the new television set since television are often used for longer period of time, so firms cannot determine the exact product replacement. This makes estimation of demand for television set very difficult. The third problem could be uncertainty regarding consumer preferences. Firms do not know whether consumers attach more value to price r to quality or to features.

There is always a kind of dilemma between price and quality (or features). If the product is of high quality and features, it is likely to carry high price. Now if consumers attach more value to price, they are likely to purchase a product with fewer features because it would less costly to them.

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