Which of the following BEST illustrates the concept of derived demand?
A)The number of retail stores in a downtown area decreases even though demand for retail goods increases.
B)An increase in the number of new,single-family homes results from a spurt in the gross national product.
C)A Chinese plastics company increases its output because of its customers' higher toy exports to the United States.
D)A heat wave results in an increased demand for air conditioners.
E)Honda reducing its car prices causes GM to do the same.

Question

Quizplus · Accepted Answer

Derived demand refers to the demand for a product or service that arises from the demand for another product or service. In this case, the Chinese plastics company is increasing its output because of the higher demand for toys in the United States, which is the result of the economic growth in that country. Therefore, the demand for plastics is derived from the demand for toys.

Which of the Following BEST Illustrates the Concept of Derived