Question

Question Number 1) Eaton sells only to businesses and focuses on the electrical, hydraulics, aerospace, and vehicle markets. When the economic crises hit in 2008, consumers began cutting back, and as a result, Eaton's customers needed to cut costs and scale back operations. This, in turn, impacted Eaton's sales, which is known as __________.

Answer 1

Answer:

The best answer to the question: This, in turn, impacted Eaton´s sales, which is known as:____, would be: Derived demand.

Explanation:

In economics, we talk about derived demand as the desire, or demand for intermediate goods, or services, that make part of another intermediate or final good or service. An example of this is the production of a plane. In order to produce a plane, Boeing would require a series of intermediate goods to produce its final good, which is the plane. The demand for these intermediate goods: steel, laborers, and anything that would make part of producing an airplane, is what is known as a derived demand. In the case of Eaton, they are precisely focused on the production of these intermediate items, which they sell to other businesses for different purposes. However, with the financial crisis of 2008, these industries to which Eaton sold their products and services, had to cut down on costs, and therefore, stopped demanding products from that company. The impact on Eaton´s sales is known as derived demand.