Question

Other than the demand for labor, what would be another example of a "derived demand?"

Short answer

The demand for raw materials needed for production is an example of derived demand. Raw materials, such as steel, glass, and rubber, are used to manufacture finished products like cars. When there is an increase in the demand for cars, there is typically an increase in the demand for the raw materials needed to produce them. In this case, the demand for raw materials is derived from the demand for cars, as the raw materials' primary purpose is to help in producing the final product, not for their independent use.

Step-by-step solution

Understand Derived Demand

Derived demand refers to the demand for a good or service that exists because of the demand for another good or service. In simple terms, the demand for one good or service arises as a result of the demand for another good or service. An example provided in the exercise is the demand for labor. Labor is a derived demand because the need for workers arises due to the need for goods and services produced by these workers.

Brainstorm examples of derived demand

It's essential to think of another example of derived demand to help understand the concept better. Some common examples of derived demand include: 1. Raw materials needed for production 2. Fuel for transport 3. Real estate for business operations

Choose an example to present

For this exercise, let's choose the demand for raw materials needed for production as an example of derived demand.

Explain the chosen example

The demand for raw materials needed for production is an example of derived demand. Raw materials are the basic materials required to manufacture a finished product. When there is an increase in the demand for the finished product, there is typically an increase in the demand for the raw materials needed to produce it. For instance, let's take the automobile industry. Car manufacturers require steel, glass, rubber, and other materials to produce cars. If there is an increase in the demand for cars, the demand for these raw materials will also increase. In this case, the demand for raw materials is derived from the demand for cars. The raw materials are not demanded for their own use but for their use in producing the desired product - a car. This example illustrates the concept of derived demand and how it occurs in real-world situations other than the demand for labor.