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Difficulty: MediumTypes of Demand

Complete the statement below by identifying the correct economic classification of demand.

Answer:A shoe factory increases its orders for natural rubber to produce more athletic sneakers following a surge in consumer demand for footwear. In economic analysis, the factory's demand for natural rubber is classified as 【derived】 demand.

Answer

The demand for natural rubber in this scenario is classified as derived demand.
Derived demand occurs when the demand for a good or factor of production is dependent on the demand for another final good or service. Natural rubber is demanded by manufacturers to make sneakers, so its demand stems directly from consumer demand for footwear.

Step-by-Step Solution

1
Examine the relationship between the raw material (natural rubber) and the final product (athletic sneakers).
Natural rubber is an input used in the production process of footwear, rather than a final consumer good.
Understanding whether a good is consumed directly or used as a production input determines its demand classification.
2
Apply the appropriate demand type definition.
Demand for an input or factor of production that arises directly from the demand for the final commodity it produces is defined as derived demand.
The factory demands rubber only because consumers demand sneakers.

Key Concept

Derived Demand
Estimated Time:1m 0s
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Topics

Types of Demand

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