Answer to Question #278591 in Microeconomics for Rohit

Question

Explain the concept of derived demand of the factor of production.

Answer 1

Solution:

Derived demand refers to demand for a factor of production or intermediate good that occurs as a result of the demand for another intermediate or final good. In essence, the demand for, say, a factor of production by a firm is dependent on the demand by consumers for the product produced by the firm.