Derived Demand Means That the Demand for a Factor of Production

question 139

Multiple Choice

Derived demand means that the demand for a factor of production is derived from the

• A) supply of that factor of production.
• B) price of that factor of production.
• C) demand for the goods and services the factor of production is used to produce.
• D) costs of production.
• E) government, which forces large firms to hire at least some minimum number of different resources.

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Definitions:

Parity Concept

A principle aiming to ensure equivalence, such as purchasing power parity in currencies, which suggests equal purchasing power for different currencies in their home countries.

Economic Rationale

The reasoning behind economic behaviors and decisions, based on the principles of costs, benefits, and economic efficiency.

Overproduction

The situation where more goods or services are produced than are demanded, causing prices to drop or resources to be wasted.

European Community

The European Community was a regional organization aimed at integrating its member states economically and politically, serving as a precursor to the European Union.