Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 12 - The Demand for Resources - Questions - Page 263: 1

Answer

Resource prices determine money incomes and help ration resources. Resources are a Derived Demand. They are demanded when a producer requires them to supply a good or service. Resourced demand curves slope downwards because they reflect the demand curves of the producers to which they are being supplied. As the producer's demand curve slopes downward, so is the quantity of resources demanded to make the product.

Work Step by Step

Derived demand is the definition of a relationship between a primary product and the resources that go into making it. It's pretty straight-forward to assume that as your primary product declines on the demand curve, the supplies used to make it will also decline. If I use aluminum to make an I phone and as I raise the prices, the quantity demanded goes down....I will demand aluminum in a smaller quantity.
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