The demand for capital by a firm is based on the demand for the product that the capital produces. This relationship is referred to as
A) product demand.
B) derived demand.
C) resource utilization.
D) cost minimization.

Question

Quizplus · Accepted Answer

The relationship between demand for capital and demand for the product it produces is derived demand. The demand for capital is not just based on the company's desire for it, but rather on the fact that it is necessary to produce the goods or services for which there is a demand. The other options (A, C, and D) are not accurate descriptions of this relationship.

The Demand for Capital by a Firm Is Based on the Demand