A firm's demand for a factor of production is derived from its decision to supply a good in the market and is therefore referred to as a derived demand.

Question

Quizplus · Accepted Answer

This statement is true. The demand for a factor of production, such as labor, is derived from the firm's decision to produce and sell a good in the market. If the firm wants to increase its production of a good, it will need to hire more workers, which increases its demand for labor. Therefore, the demand for a factor of production is derived from the demand for the final product.

A Firm's Demand for a Factor of Production Is Derived