When the demand for automobiles is high,the demand for workers who build automobiles is high.This relation between the market for automobiles and the market for the labour that builds automobiles is why demand in a factor market is called:
A) the marginal productivity theory of income distribution.
B) a compensating differential.
C) the factor distribution of income.
D) a derived demand.

Question

Quizplus · Accepted Answer

The scenario described in the question is an example of derived demand, which is the term used to describe the demand for a factor of production (in this case, workers who build automobiles) that is derived from the demand for the final product made with that factor (in this case, automobiles). Therefore, option D is the correct answer. Option A refers to a different theory about income distribution, option B refers to the difference in wages paid due to factors such as working conditions, location, and job security, and option C refers to the distribution of income among factors of production, but none of them accurately describes the scenario presented in the question.

When the Demand for Automobiles Is High,the Demand for Workers