Factor demand called derived demand because it:
A)requires the use of other factors.
B)depends on product demand.
C)has a downward-sloping demand curve.
D)has a constant marginal factor cost.

Question

Quizplus · Accepted Answer

Factor demand is derived from the demand for the final product or service that the factor of production is used to produce. This means that as product demand increases, the demand for the factor used to produce that product (such as labor or raw materials) also increases. Therefore, the correct answer is B, which states that factor demand depends on product demand.

Factor Demand Called Derived Demand Because It