Question : The demand for the commodity is direct but the demand for a factor of production is called a:
Option 1: crossed demand
Option 2: joint demand
Option 3: derived demand
Option 4: independent demand
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Correct Answer: derived demand
Solution : The correct answer is derived demand .
Demand for a factor of production, such as labour or capital, is referred to as "derived demand". Derived demand means that the demand for these factors is derived from the demand for the final goods or services that these factors are used to produce. In other words, the demand for factors of production is not for their own sake but is derived from the demand for the goods and services they help produce. Derived demand occurs when elements of production are wanted for their capacity to contribute to the creation of products and services rather than for their own sake.
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