The demand for a factor of production is called a derived demand because it is derived from
A) the demand for goods and services produced by the factor of production.
B) a table of specific prices and quantities.
C) the ideas of an entrepreneur.
D) a financial market.
E) the supply of the factor of production.

Question

Quizplus · Accepted Answer

The demand for a factor of production is derived from the demand for goods and services produced by that factor. In other words, firms do not directly demand labor, land, or capital, but rather they demand these factors because they are necessary inputs in the production of the goods and services that the firm is producing. Therefore, the demand for factors of production is derived from the demand for goods and services.

The Demand for a Factor of Production Is Called a Derived