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Chapter 4: Problem 21

Other than the demand for labor, what would be another example of a "derived demand?"

Short Answer

Expert verified
A suitable example of derived demand other than labor demand is the demand for raw materials, such as steel. The demand for steel is derived from the demand for products made from steel, like automobiles, construction materials, and appliances. The demand for steel is indirectly influenced by consumer needs for finished products, which leads to increased demand for steel as a primary input in production.

Step by step solution

01

Identify the Example

A good example of derived demand besides labor demand is the demand for raw materials, such as steel. The demand for raw materials is derived from the demand for finished products that are produced using those raw materials.
02

Explain the Derived Demand

The demand for steel is derived from the demand for products made from steel, such as automobiles, construction materials, and appliances. When consumers want more automobiles, for example, manufacturers will increase their production, leading to an increase in the demand for steel. The demand for steel in this case is not due to the direct need for steel by consumers but rather stems from their demand for automobiles, which in turn leads to a higher demand for steel as a primary input in automobile production.

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Most popular questions from this chapter

Which of the following changes in the financial market will lead to an increase in the quantity of loans made and received: a. a rise in demand b. a fall in demand c. a rise in supply d. a fall in supply

During a discussion several years ago on building a pipeline to Alaska to carry natural gas, the U.S. Senate passed a bill stipulating that there should be a guaranteed minimum price for the natural gas that would flow through the pipeline. The thinking behind the bill was that if private firms had a guaranteed price for their natural gas, they would be more willing to drill for gas and to pay to build the pipeline. a. Using the demand and supply framework, predict the effects of this price floor on the price, quantity demanded, and quantity supplied. b. With the enactment of this price floor for natural gas, what are some of the likely unintended consequences in the market? c. Suggest some policies other than the price floor that the government can pursue if it wishes to encourage drilling for natural gas and for a new pipeline in Alaska.

Are households demanders or suppliers in the goods market? Are firms demanders or suppliers in the goods market? What about the labor market and the financial market?

Why are the factors that shift the demand for a product different from the factors that shift the demand for labor? Why are the factors that shift the supply of a product different from those that shift the supply of labor?

Name some factors that can cause a shift in the supply curve in labor markets.
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