Examkin

Question

Difficulty: HardTypes of Demand

Complete the statement below by identifying the correct economic classifications of demand demonstrated in the road construction scenario.

Answer:An increase in government contract awards for highway infrastructure causes a surge in the market requirement for bitumen. Because bitumen is not purchased for direct final consumption but to produce completed tarred roads, its market demand is classified as 【derived】 demand. Furthermore, because bitumen, crushed granite, and heavy asphalt pavers must be used simultaneously to construct a paved road, their combined market relationship represents 【joint】 demand.

Answer

The first blank is 'derived demand' (or 'derived') and the second blank is 'joint demand' (or 'complementary demand').
Bitumen's demand originates directly from the demand for finished road infrastructure, making it derived demand. Additionally, because bitumen, granite, and pavers must be used in unison to pave roads, they display joint (complementary) demand.

Step-by-Step Solution

1
Analyze why bitumen is demanded in the market.
Bitumen is demanded as an intermediate raw material/factor input to produce paved roads, not for its own direct utility.
Demand that arises as a direct consequence of the demand for a final product or service is defined as derived demand.
2
Analyze the structural relationship between bitumen, crushed granite, and heavy asphalt pavers.
These materials and equipment must be combined together at the same time to complete the construction process.
Goods or factors of production that are required together in fixed or variable proportions to satisfy a single want exhibit joint (complementary) demand.

Key Concept

Classification of Interrelated Demand (Derived vs Joint Demand)
Rate this question

Topics

Types of Demand

More questions from this topic