Replacement demand, Microeconomics

The total demand consists of:

1. New owner demand and

2.A replacement demand

The replacement demand tends to grow with the in the total stock with the consumers. Once a person gets used to a thing she is unlikely to give it up at some future date. This makes replacement demand regular and predictable. For certain established products life expectancy tables are been prepared in developed countries in order to estimate the average replacement rates. When purchasing power increases the scrap page tens to increase. The total demand it symbolically stated as D = N + R where N is new owner demand and R is the replacement demand. Each of these independent variable may be forecasted separately. The purchasing power the number of families and some other factors depending on the product concerned set an upper limit to the maximum or the optimum ownership level. It is the level towards which the actual volume of consume stock tends to gravitate. The difference between optimum and the actual stock shows the growth potential of the demand for durable goods.

Posted Date: 3/30/2013 1:53:13 AM | Location : United States

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