2016 · Q28
The demand for a factor production is said to be derived demand because
- 1It is function of the profitability of an enterprise
- 2It depends on the supply of complementary factors
- 3It stems from the demand for the final product
- 4It arises out of means being scarce in relation to wants
Which of the above reasons is/are correct?
Indian EconomyGrowth and sectors
- A1 only
- B3 only
- C2 and 4 only
- D1, 2, 3, and 4
Explanation
Factor demand is called “derived” demand precisely because it is derived from — it stems from — the demand for the final goods and services the factor helps produce; firms hire labour or buy inputs only to make products consumers want. Profitability (1), complementary factors (2), and scarcity (4) affect factor markets but do not define “derived”. The official key for this repeated APFC question confirms “3 only”. Hence (B).