Question

“The demand for factor of production is a derived demand”

1. What does the factor of production mean?
2. What does the statement above mean?

Answer 1

A) Factor of production means input used in the production process to produce output.as we know without input we can't produce output hence it is necessary to used factor of production for producing output.

B) Derived demand means the demand for a Factor of production which is occurred as a result of the demand for another intermediate or final good.we can say that demand for a Factor of production by a firm is dependent on the demand by consumers for the product produced.