Which of the following best describes the concept where consumer purchasing demand affects business purchasing decisions?

• A. Price elasticity of demand
• B. Derived demand
• C. Consumer surplus
• D. Willingness to pay

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of 'Derived Demand' in microeconomics. Derived demand occurs when the demand for a good or service results from the demand for another related good or service. In this case, businesses purchase inputs because consumers demand the final product.
2. Step 2: Recognize that 'Price elasticity of demand' measures how much the quantity demanded of a good responds to a change in its price, which is different from the concept of demand influencing business purchasing decisions.
3. Step 3: Recall that 'Consumer surplus' is the difference between what consumers are willing to pay for a good and what they actually pay, which relates to consumer benefit rather than business purchasing behavior.
4. Step 4: Understand that 'Willingness to pay' refers to the maximum amount a consumer is ready to pay for a good or service, which again focuses on consumer preferences rather than the effect on business demand.
5. Step 5: Conclude that the concept where consumer purchasing demand affects business purchasing decisions is best described by 'Derived demand' because businesses buy inputs based on the demand for the final consumer goods.