The demand for a factor of production is said to be derived demand because 1 It is a function of the...........

Indian Economy Demand and Supply , Market Structures

The demand for a factor of production is said to be derived demand because

1. It is a function of the profitability of an enterprise

2. It depends on the supply of complementary factors

3. It stems from the demand for the final product

4. It arises out of means being scarce in relation to wants

Which of the above reasons is/are correct?

This questions was previously asked in

EPFO APFC (2015)

1 only

3 only

2 and 4 only

1, 2, 3 and 4

- Derived demand for a factor of production originates from the demand for the final products it helps produce.

- Reason 1: It is a function of the profitability of an enterprise

- While profitability can influence factor demand, it's not the core aspect of derived demand.

- Reason 2: It depends on the supply of complementary factors

- This can impact the level of factor demand but isn't the primary cause.

- Reason 3: It stems from the demand for the final product

- This is the essence of derived demand, as factors are demanded because they produce goods or services wanted by consumers.

- Reason 4: It arises out of means being scarce in relation to wants

- This describes basic economic problems, not specifically derived demand.

The correct option is Option 2: 3 only.

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