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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
One example of derived demand other than the demand for labor is the demand for raw materials. This occurs when the demand for a final product, such as wooden furniture, increases, leading to an increased demand for the essential components needed to produce that product, such as wood. In this case, the demand for raw materials (wood) is derived from the demand for the final product (wooden furniture).

Step by step solution

01

Understand Derived Demand

Derived demand is the demand for a good or service that results from the demand for a different, related good or service. It occurs when the demand for one product ultimately drives the demand for another product. For example, the demand for labor results from the demand for goods and services that require human labor to produce them.
02

Identify Another Example of Derived Demand

One example of derived demand other than the demand for labor is the demand for raw materials. Raw materials are the essential components that businesses require to produce their final products. For instance, a company that produces wooden furniture experiences increased demand for its products. Consequently, it needs to increase the number of raw materials it purchases, such as wood, to meet this increased demand. In this case, the demand for raw materials (wood) is derived from the demand for the final product (wooden furniture).

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Most popular questions from this chapter

Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers. a. The number of people at the most common ages for home-buying increases. b. People gain confidence that the economy is growing and that their jobs are secure. c. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans. d. Because of a threat of a war, people become uncertain about their economic future. e. The overall level of saving in the economy diminishes. f. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.

Imagine that to preserve the traditional way of life in small fishing villages, a government decides to impose a price floor that will guarantee all fishermen a certain price for their catch. a. Using the demand and supply framework, predict the effects on the price, quantity demanded, and quantity supplied. b. With the enactment of this price floor for fish, what are some of the likely unintended consequences in the market? c. Suggest some policies other than the price floor to make it possible for small fishing villages to continue.

Suppose the U.S. economy began to grow more rapidly than other countries in the world. What would be the likely impact on U.S. financial markets as part of the global economy?

In the financial market, what causes a movement along the demand curve? What causes a shift in the demand curve?

Identify the most accurate statement. A price floor will have the largest effect if it is set: a. substantially above the equilibrium price b. slightly above the equilibrium price c. slightly below the equilibrium price d. substantially below the equilibrium price
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