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Precision Brake Company is a supplier of brake components to the manufacturers of lawn tractors and 4-wheel ATV's.It also sells its products to independent repair centers,dealers,and other wholesalers in the northeast and southern states.Precision Brake has done research on the demand for lawn tractors and found that most manufacturers are in the states of Kentucky,Tennessee,and Alabama.Research also shows that most of the dealers who sell directly to individual consumers are in the midwestern states,while dealers who sell to small business landscaping companies tend to be located in the northeastern states.Company executives are considering expansion of its distribution to markets in the midwest.
-Refer to Scenario 7.2.Last year,Precision Brake's sales to the manufacturers of lawn tractors declined,partially due to the fact that more consumers were hiring small landscaping businesses to cut their grass.This decline in sales for Precision Brake is an example of
A) Product scarcity
B) Joint demand
C) Derived demand
D) Reciprocity demand
E) Inelastic demand

Question

Quizplus · Accepted Answer

The decline in sales for Precision Brake was due to the fact that consumers were hiring small landscaping businesses to cut their grass, indicating that the demand for Precision Brake's products is derived from the demand for lawn tractors and other such equipment used by landscaping businesses. Therefore, the decline in sales is an example of derived demand.

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