The demand for labor and other inputs is a derived demand because

Question

Quizplus · Accepted Answer

The term "derived demand" refers to the demand for inputs, such as labor, that are demanded not for their own sake, but because they are required to produce other goods and services that are themselves demanded. As such, the demand for labor and other inputs is derived from the demand for the goods and services they are used to produce. When the demand for the final product increases, the demand for inputs also increases. Conversely, when the demand for the final product falls, the demand for inputs falls as well. Therefore, option D is the correct choice. Option A refers to the law of demand in general, which is not unique to derived demand. Option B is incorrect because backward bending supply curves are observed for labor, not demand curves. Option C is partially correct, as the firm's demand for labor is influenced by the overall market demand for labor, but it does not fully capture the nature of derived demand. Finally, option E is incorrect because it is irrelevant to the concept of derived demand.

The Demand for Labor and Other Inputs Is a Derived