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Give Reason Or Explain the Following Statement. Demand for Factors of Production is Derived Demand. - Economics

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Question

Give reason or explain the following statement.

Demand for factors of production is derived demand.

Solution

When goods are demanded so that they can be used in the production of some other commodities, it is called indirect or derived demand. Factors of production have an indirect or derived demand, as they are used in the production of goods meant for final consumption. For example, labour is a factor of production. However, labour would be demanded according to the demand of the commodity in the production of which it would be used. For example demand for labour in furniture producing firm would depend on the demand for furniture. The greater the demand for furniture, the production of furniture would tend to rise, thereby, the demand for labour used in the production of furniture would also increases.

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APPEARS IN

 Micheal Vaz Solution for Micheal Vaz Class 12 Economics (2019 to Current)
Chapter 3: Demand Analysis
Exercise | Q: 2.4 | Page no. 24

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Solution Give Reason Or Explain the Following Statement. Demand for Factors of Production is Derived Demand. Concept: Demand.
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