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 spike in the gross national product.
C) A Chinese plastics company decreases its output because of its customers' reduction in 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 occurs when the demand for one good or service occurs as a result of the demand for another. In this case, the Chinese plastics company's output is reduced because its customers are exporting fewer toys, which is a direct result of decreased demand for toys in the United States.

Which of the Following Best Illustrates the Concept of Derived