Chapter 69, Problem 3MCQ

To determine

The reason why factor market demand is called derived demand.

Answer to Problem 3MCQ

From the available options, the correct option is derived from the product market.

Explanation of Solution

The factor market demand does not arise by the intrinsic utility and the price or income of the factor is also not responsible to change it, therefore, options b, c, and e are not correct. Furthermore, the name of the factor market demand does not originate from the Latin word and this option is incorrect.

But the factor market demand is derived from the product market because products are required to make another product in the market and the demand for one product can change the demand for another. Therefore, the correction option is d.

Economics Concept Introduction

Introduction: The factor market demand refers to the demand which is derived from the product market and can be influenced by the needed resources that support to produced goods and services in the market.