Which of the Following Best Illustrates the Concept of Derived

question 211

Multiple Choice

Which of the following best illustrates the concept of derived demand?

• 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)A Chinese plastics company increases its output because of its customers' higher toy exports to the United States.
• D)A heat wave results in an increased demand for air conditioners.
• E)Honda reducing its car prices causes GM to do the same.

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Definitions:

Third-Degree Price Discrimination

A pricing strategy where a seller charges different prices to different consumer groups for the same product, based on their willingness to pay.

Marginal Cost Function

A mathematical expression that describes how the cost of producing one additional unit of a good or service varies with the quantity produced.

Reservation Price

The maximum amount a consumer is willing to pay for a good or service.

Elasticity of Demand

An index that determines the sensitivity of consumer demand for a product to its price change, by comparing the percent change in the amount of the good demanded with the percent change in its price.