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Lecture Note

Durable goods are products that last over 3 years, such as cars, appliances, and furniture. Non-durable goods have a lifespan of less than 3 years and are immediately consumed, such as food, clothing, and cleaning products. Durable goods orders indicate the health of the economy, as high orders mean a positive economy, while low orders signal a weak economy. GDP measures economic activity within a country's borders, while GNP includes income earned abroad by citizens, making the key difference that GNP accounts for international factors.

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60 views

Lecture Note

Durable goods are products that last over 3 years, such as cars, appliances, and furniture. Non-durable goods have a lifespan of less than 3 years and are immediately consumed, such as food, clothing, and cleaning products. Durable goods orders indicate the health of the economy, as high orders mean a positive economy, while low orders signal a weak economy. GDP measures economic activity within a country's borders, while GNP includes income earned abroad by citizens, making the key difference that GNP accounts for international factors.

Uploaded by

Shahriar Sifat
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Durable vs. Non-Durable Goods: What's the Difference?

Put simply, durable goods are products that do not need to be purchased often, whereas non-durable
goods are products that expire more quickly. The rule of thumb for this is, if it lasts longer than 3 years,
it is a durable good, and if it lasts less than 3 years, it is a non-durable good.

Durable Goods

Durable Goods Orders are an economic indicator released monthly by the Census Bureau. It reflects new
orders placed with domestic manufacturers for the delivery of factory hard goods. A hard good is a good
that does not quickly wear out. It yields utility over time instead of being consumed in one use. Items
like bricks would be considered durable goods because ideally they should never wear out. Durable
goods are also classified as items that have long periods between successive purchases. They usually
include cars, home appliances, consumer electronics, furniture, sports equipment, firearms and toys.
When durable goods are selling well, it generally indicates a positive economy. When sales are down, so
is the health of the economy.

Non-Durable Goods (Soft Goods)


Non-durable goods or soft goods are the opposite of durable goods and are called consumables. They
may be defined as goods that are immediately consumed in one use or have a lifespan of less than three
years. Examples of non-durable goods include cosmetics, cleaning products, food, fuel, beer, cigarettes,
paper products, rubber, textiles, clothing and footwear. While durable goods can be rented as well as
bought, non-durable goods are generally not rented. Buying durable goods come under the category
“demand of goods,” whereas buying non-durable goods come under the category of “consumption of
goods.” What kind of a consumer are you?

Direct and Indirect Taxes

The most fundamental classification of taxes is based on who collects the taxes from the tax payer.

Direct Taxes, as the name suggests, are taxes that are directly paid to the government by the taxpayer.
It is a tax applied on individuals and organizations directly by the government e.g. income tax,
corporation tax, wealth tax etc.

Indirect Taxes are applied on the manufacture or sale of goods and services. These are initially paid to
the government by an intermediary, who then adds the amount of the tax paid to the value of the goods
/ services and passes on the total amount to the end user.

Examples of these are sales tax, service tax, excise duty etc.

Difference between GDP and GNP

Gross National Product (GNP) measures the aggregate final output of businesses and citizens over a
one-year period much like GDP. This means that the economic activity of a United States citizen who is
working abroad is counted in the United State's GNP and not in GDP. But when a Japanese worker is
working within the geographical boundary of the United States, he or she will be counted in Japan's GNP
and the United State's GDP not GNP.

The difference between GDP and GNP is called the net foreign factor income. This is the foreign income
that is earned domestically subtracted from income received from foreign domestic sources. In other
words, it is a country's Gross Domestic Product subtracted from its Gross National Product. In many
countries there are significant differences between their GDP and GNP. This is not as much of an issue
for the United States as it is for developing countries because much of their revenue comes from
Foreign Direct Investment. This means that foreign companies are locating within another country's
borders and doing business. The revenue from the foreign company will count in the home country's
GDP but not in their GNP. If a country has a lot of foreign investment then it will have a higher GNP than
GDP.

Net National Product (NNP) is the Gross National Product minus capital depreciation

NNP = GNP - Depreciation

Depreciation is usually about ten percent of GNP and subtracting it from GNP displays the net result of
all economic activity

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