Questions
Questions
Single choice

Which statement best illustrates the concept of derived demand?

Options
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.Honda reducing its car prices causes GM to do the same.
D.A Chinese plastics company decreases its output because of its customers’ reduction in toy exports to the United States.
E.A heat wave results in an increased demand for air conditioners.
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Step-by-Step Analysis
Let’s begin by carefully restating the scenario to frame what derived demand means in this context. Option 1: 'The number of retail stores in a downtown area decreases even though demand for retail goods increases.' This seems contradictory at first glance, as rising demand for goods would normally support more stores, not fewer. It does not illustrate derived demand because it doesn’t show demand for one good or factor arising from demand for anoth......Login to view full explanation

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