Chapter 14: Problem 1

Derived demand is the demand for (LO1) a) final goods and services b) resources c) final goods as well as services and resources d) neither final goods and services nor resources

Short Answer

Expert verified

Derived demand is the demand for \( \boxed{\text{(b) resources}} \).

Step by step solution

Understanding Derived Demand

Derived demand is a term used in economics to describe the demand for a good or service that results from the demand for a different, related good or service. In other words, the demand for one item depends on the demand for another item used in its production or consumption. Now, let's evaluate each option:

Option a: Final goods and services

Final goods and services are consumed or utilized by end-users or customers. While the demand for final goods and services is important, they do not represent derived demand. Derived demand comes from the demand for resources or intermediate goods required to produce these final goods and services. So, option (a) is incorrect.

Option b: Resources

Resources, such as labor, capital, and raw materials, are necessary inputs for the production of goods and services. The demand for these resources is directly related to the demand for the final goods and services they help produce. Thus, the demand for resources is derived from the demand for final goods and services. Option (b) correctly defines derived demand.

Option c: Final goods as well as services and resources

Option (c) combines options (a) and (b). It suggests that derived demand refers to the demand for final goods, services, and resources. However, as we have already established, derived demand only refers to the demand for resources necessary for the production of final goods and services. Therefore, option (c) is not accurate.

Option d: Neither final goods and services nor resources

Option (d) claims that derived demand refers to neither final goods and services nor resources. As we have already determined that derived demand is the demand for resources necessary for the production of final goods and services, option (d) is incorrect. From the analysis of each option, we can conclude that: Derived demand is the demand for \( \boxed{\text{(b) resources}} \).