The demand for a factor is considered to be a derived demand because it is derived from the firm's decision to supply output in another market.

Question

Quizplus · Accepted Answer

The demand for a factor of production such as labor, capital, or land is derived from the firm's decision to produce and sell goods or services in another market. This is because firms demand factors of production only to the extent that they can help produce goods or services that can be sold in a market where there is demand for them. Therefore, the demand for factors is derived from the demand for the final goods or services that they help produce.

The Demand for a Factor Is Considered to Be a Derived