The demand for a factor of production is derived from the demand for the output that it produces.

Question

Quizplus · Accepted Answer

This statement is true according to the theory of derived demand. It suggests that the demand for a factor of production, such as labor or capital, is not inherent but rather arises from the demand for the goods or services that it helps to produce. For example, the demand for a construction worker is derived from the demand for new buildings or infrastructure projects. As such, changes in the demand for output will likely impact the demand for the factors of production needed to produce that output.

The Demand for a Factor of Production Is Derived from the Demand