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 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 reduces its car prices, which 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 increased output is due to the higher demand for toys in the United States, illustrating derived demand.

Which of the Following Best Illustrates the Concept of Derived