Which of the following is the best example of a derived demand?
A) A decrease in the price of TVs will increase the demand for DVD players.
B) An increase in demand for cars will increase the demand for auto workers.
C) An increase in the price of butter increases the demand for margarine.
D) A decrease in interest rates increases the demand for housing.
E) An increase in the wage rate causes firms to substitute capital for labour.

Question

Quizplus · Accepted Answer

The increase in demand for cars will increase the demand for auto workers, as more workers will be needed to produce the increased quantity of cars. This is an example of derived demand, where the demand for one good or service is derived from the demand for another good or service.

Which of the Following Is the Best Example of a Derived