A demand for a factor of production is said to be "derived" because the factor's demand depends
A)entirely on the cost of the factor.
B)entirely on corporate advertising.
C)heavily on government policy.
D)heavily on public choice.
E)on the demand for the good or services it helps to make.

Question

Quizplus · Accepted Answer

A factor of production, such as labor or capital, is considered "derived" because its demand is derived from the demand for the final goods or services it helps to produce. In other words, the factor is only demanded because it is needed in the production of a specific product that consumers are willing to purchase. Therefore, the demand for the factor is dependent on the demand for the final product, not solely on its cost, government policy, or public choice.

A Demand for a Factor of Production Is Said to Be