EBK MICROECONOMICS
EBK MICROECONOMICS
10th Edition
ISBN: 8220100543425
Author: MELVIN
Publisher: Cengage Learning US
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Chapter 15, Problem 1E
To determine

To explain:

The demand for a commodity affects the demand for resources required to produce the concerned commodity.

Expert Solution & Answer
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Explanation of Solution

Goods produced in market are made up of raw materials. Demand for raw materials or intermediate goods which is made to produce final goods for consumption is called derived demand. So, derived demand is the demand made of resources which is made to produce final goods.Consumption of the final goods affects derived demand.

For example,demand for petrol leads to demand for extraction. If demand for petrol is less due to increase in price of petrol or increase in price of automobiles etc., it will lead to less extraction. On the other hand, if demand for petrol rises, it leads to increase in extraction of petrol.

Economics Concept Introduction

Derived demand:

The demand for a good or service arising as the outcome of the demand for another good or service, is referred as derived demand.

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