of GDP (-31.98%), DG remained nearly the same (-2.6%), and S increased by nearly 58%. I will treat each of these components separately in a discussion of some of the underlying reasons for their relative changes. Of the three components of Consumer spending, Durable goods spending has changed the least. In 1959 about 8.42% of GDP was spent on DG, while in 1999 DG comprised 8.2% of GDP. This is not surprising if one makes the valid assumption that the demand for durable goods is less elastic than the other components of C. For example, a rational person will not buy more than one washing machine every six years or so, even if their relative income has increased, or if the price of washers decreases. Even if they were inclined to replace a durable good before its service life ended, most people would not consider owning more than one washing machine at a time, or having more than one car per driver. Another reason that DG spending (relative to GDP) does not seem to change is that there have been significant increases in the way that durable goods are manufactured. Advancements in technology and quality control procedures allow manufactures to produce higher quality goods with longer service lives, which consequently need less frequent replacement. Also global competition has forced American manufactures to produce higher quality goods at more competitive prices.Consumer spending on Non-Durable Goods (NDG), relative to GDP, has fallen sharply from 29.27% of GDP in 1959 to 19.91% of GDP in 1999. Im not sure what caused this decrease, but I have some ideas. First, increases in manufacturing quality have improved the service life of most every product, from tennis shoes to light bulbs. Secondly, many low dollar items are no longer made domestically, in favor of foreign factories with lower operating costs, cheaper labor, and relaxed (if existent) environmental policies. Some of the components of NDG, like food spending, are relati...
