When economists say that the demand for labor is a derived demand, they mean that it is
A) dependent on government expenditures for public goods and services.
B) related to the demand for the product or service labor is producing.
C) based on the desire of businesses to exploit labor by paying below equilibrium wage rates.
D) based on the assumption that workers are trying to maximize their money incomes.

Question

Quizplus · Accepted Answer

The term "derived demand" means that the demand for a particular factor of production (in this case, labor) is derived from the demand for the goods or services that the factor helps to produce. In other words, businesses don't want to hire labor just for the sake of hiring labor; they want to hire labor because they need workers to produce the goods or services that they sell. Therefore, the demand for labor is closely related to the demand for the goods or services that the labor is producing.

When Economists Say That the Demand for Labor Is a Derived