Which of the following best illustrates the concept of "derived demand?"

a) An increase in the wages of auto workers will lead to an increase in the demand for robots in automobile factories.

b) An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers.

c) An increase in the price of gasoline will lead to an increase in the demand for small cars.

d) An automobile producer's decision to supply more minivans results from a decrease in the demand for station wagons.

Question

Business

Trenton

3 October, 14:11

Which of the following best illustrates the concept of "derived demand?"

a) An increase in the wages of auto workers will lead to an increase in the demand for robots in automobile factories.

b) An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers.

c) An increase in the price of gasoline will lead to an increase in the demand for small cars.

d) An automobile producer's decision to supply more minivans results from a decrease in the demand for station wagons.

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Answers (1)

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Valentino Keith · Answer 1

b) An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers.

Explanation:

Derived demand describes the demand for a product or service that results from the demand for an intermediate or a related good or service. Demand is only referred to as derived if it's solely as a result of the product being demanded to produce or acquire other goods or services. The demand for intermediate or related goods is directly proportional. Should the demand for a good increase, the demand for its related or intermediate goods increases.

An increase in the supply of car implies more workers will be needed to work to produce them. The increase in demand for workers is purely a result of an increase in the production of cars.