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Question

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

A
It is a function of the profitability of an enterprise.
B
It depends on the supply of complementary factors.
C
It stems from the demand for the final product.
D
It arises out of means being scarce in relation to wants.
Solution
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Correct option is C. It stems from the demand for the final product.
The demand for a factor of production is said to be a derived demand because it arises not from the intrinsic utility provided by the factor but because of the value placed on the products it produces by consumers.
For example, when a businessman requires labour for manufacturing a product then his actual target is the final product.
Hence c is the correct answer.

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