Examkin

Question

Difficulty: MediumTypes of Demand

Complete the statement below regarding market demand relationships by identifying the correct classification of demand.

Answer:When an increase in the market demand for residential housing directly leads to a higher demand for construction materials such as cement, the demand for cement is classified as 【derived】 demand.

Answer

derived
The correct answer is derived demand because the demand for raw materials like cement does not arise for direct personal satisfaction, but is derived from the consumer demand for the final output (residential housing).

Step-by-Step Solution

1
Analyze the relationship between the two commodities mentioned in the scenario
Residential housing is the final consumer commodity, whereas cement is an intermediate input used in construction.
Identifying whether a product is a final good or an input helps determine the origin of its demand.
2
Apply the economic definition of derived demand
The demand for cement exists because of the demand for the final product (housing).
When the demand for a factor or raw material depends on the demand for the ultimate good it produces, it is known as derived demand.

Key Concept

Derived Demand
Estimated Time:45s
Rate this question

Topics

Types of Demand

More questions from this topic