The industry demand for an input is called derived demand because:
A)the demand for the input is derived from the demand for the final product.
B)the industry's input demand curve is the same as the firm's input demand curve.
C)the demand for the input is derived from the supply of other inputs.
D)the industry's input demand curve coincides with the marginal product curve of the input.

Question

Quizplus · Accepted Answer

Derived demand means that the demand for an input is derived from the demand for the final product. In other words, the demand for the input depends on the demand for the output it helps to produce. This makes choice A the correct answer. Choice B is incorrect because the industry's input demand curve may differ from the firm's input demand curve due to differences in market structure or technological considerations. Choice C is also incorrect because the demand for an input is not derived from the supply of other inputs, but rather from the demand for the final product. Finally, choice D is incorrect because the industry's input demand curve is not necessarily the same as the marginal product curve of the input, which reflects the productivity of additional units of the input.

The Industry Demand for an Input Is Called Derived Demand