A firm's demand for labor is known as a "derived demand" because:
A)the firm gains utility from hiring more labor.
B)the amount of labor hired depends upon how much output the firm can sell.
C)the wage rate paid to workers is derived from the market for labor.
D)it's derived from the demand for capital.

Question

Quizplus · Accepted Answer

The term "derived demand" refers to the demand for a good or service that arises as a result of the demand for another good or service. In the case of labor, the demand for it is derived from the demand for the output it helps produce. Therefore, the amount of labor hired by a firm is dependent on how much output the firm is able to sell.

A Firm's Demand for Labor Is Known as a "Derived