A firm's demand for labor is referred to as a derived demand because
A)It is derived from the MPP of labor.
B)It is derived from the demand for the product that the labor is producing.
C)The quantity of goods and services labor can purchase is derived from the wages labor receives from the firm.
D)It is derived from the supply of labor.

Question

Quizplus · Accepted Answer

The demand for labor is derived from the demand for the product that the labor is producing. In other words, if there is an increase in demand for the product, the firm will need to hire more labor to produce that product. Conversely, if there is a decrease in demand for the product, the firm will need to reduce labor in order to not overproduce and accumulate unnecessary inventory. The demand for labor is not directly derived from the MPP of labor, the supply of labor, or the quantity of goods and services labor can purchase.

A Firm's Demand for Labor Is Referred to as a Derived