Multiple choice

The demand for labour by a firm is a derived demand because it depends upon

  1. the demand for goods and services that labour helps to produce

  2. the degree of substitution between labour and other factors of production

  3. the elasticity of demand for labour

  4. the demand for other factors of production
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Derived demand occurs when the demand for a factor of production (like labour) arises from the demand for the final product it helps produce. A firm hires workers because consumers want the goods and services those workers produce. If demand for the final product decreases, demand for labour to produce it also decreases.

Keep practicing — related questions