The theory of consumption of durable goods
A)is basically a theory of investment applied to households
B)states that durable goods purchases are very insensitive to interest rate changes
C)can be explained very well by the life-cycle theory, since people spread their durable goods purchases equally over their lifetimes
D)suggests that expenditures on durable goods do not increase utility as much as expenditures on other consumption goods
E)none of the above

Question

Quizplus · Accepted Answer

The theory of consumption of durable goods is based on the idea that households view purchases of durable goods as investments since they provide utility over a long period of time. Therefore, the theory can be considered as a theory of investment applied to households.

The Theory of Consumption of Durable Goods