Due to rapidly rising overhead costs and prices of raw materials, Screw Manufacturing Pty Ltd was forced to raise the prices of its nails, which Ruckles sells to timberyards and hardware stores, by 35 per cent. Other nail manufacturers have raised their prices for similar reasons. The sales force at Ruckles believes the price increase will result in a drop in sales. You are the marketing manager and you disagree, because the nails are:
A) derived demand.
B) price inelastic.
C) price elastic.
D) J- curve demand.
E) fluctuating demand.

Question

Quizplus · Accepted Answer

Nails are a derived demand, meaning that their demand is derived from the demand for the products they are used in, such as furniture and construction. As such, the demand for nails is not very sensitive to price changes, making them price inelastic.

Due to Rapidly Rising Overhead Costs and Prices of Raw