Authorized users may be able to access the full text articles at this site. As a result, TeleTax would hire fewer accountants. b. minimize variable costs. 47. On this Wikipedia the language links are at the top of the page across from the article title. b. hire more boats. It is simply the market wage (i.e., the price per unit of labor). Russia is losing around 150 tanks a month in Ukraine, and is becoming reliant on refurbished vehicles. For example, the demand for labor in the construction of buildings is a derived demand. It is the additional value of output resulting from the additional employee the price of the output times the worker's marginal contribution to output, his MP. Factors Choose the letter of the correct term or concept below to complete the sentence. [1], Another example is the derived demand for labour - the amount of labour demanded in the production of soap depends upon the demand for soap, that workers help produce[3], The concept of the derived demand curve for an input was developed by Alfred Marshall. What role does your forecast of future interest rates play in your decision? Hiring the third accountant increases TeleTaxs output per evening by 23 calls. A firm must have labor to produce goods and services. Labor - Firms demand for labor Marginal revenue product - Dollar value of a workers productivity How much money they are earning for the business - Change in total revenue/change in labor Because a firm's demand for a factor of production is derived from its decision to supply a good in the market, it is called a, 7. The output produced by the various numbers of workers yields a marginal product curve, whose values are stated in column 3. Based on the given information, it is likely that Gertrude's firm has d. supply-shifting technology. Derived demand is used in economic analysis to illustrate market existence of related products or services (Nicholas, 2009). The marginal revenue product of labour is the additional revenue generated by hiring one more unit of labour where the marginal revenue declines. a. b. hiring Bill would involve a negative marginal product. Web Refers to the demand for labour by employers and the supply of labour (provided by potential employees) Demand for labour is a derived demand-not wanted for its own sake but for what it can contribute to production The demand for labour is dependent on the demand for the final product that labour produces. Table 12.1 contains information from the example developed in Chapter 8. We can use Ms. Lancasters marginal revenue product curve to determine the quantity of labor she will hire. It has become familiar to millions through a diverse publishing program that includes scholarly works in all academic disciplines, bibles, music, school and college textbooks, business books, dictionaries and reference books, and academic journals. NR 348 Peds: ATI Chapters 1-8,9-10,12-15,20-2, Fundamentals of Engineering Economic Analysis, David Besanko, Mark Shanley, Scott Schaefer, Alexander Holmes, Barbara Illowsky, Susan Dean, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, SECURITIES REGULATION, INVESTOR PROTECTION AN, AP LATIN EXAM TRANSLATIONS Caesar -- to memor. d. any mythical historical figure. It is derived from the demand for the product that the factor produces. c. Luddite technology. 38. Hence it would not be profitable to employ the eighth, because his marginal contribution to profit would be negative. demand for the If an additional worker adds 4 units of output per day to a firms production, and if each of those 4 units sells for $20, then the workers marginal revenue product is $80 per day. D. none of the above. In a perfectly competitive market the marginal revenue a firm receives equals the market-determined price P. Therefore, for firms in perfect competition, we can express marginal revenue product as follows: [latex]In \: perfect \: competition, \: MRP = MP \times P[/latex]. At six accountants, the marginal cost of a call would be $150/13 = $11.54, which is greater than the $10 price, so hiring a sixth accountant would lower profit. 37. Technological changes can increase the demand for some workers and reduce the demand for others. 23. If the firm is competitive in both the market for sandwiches and in the market for sandwich-makers, then it has In Chapter 3 we obtained a market demand by summing individual demands horizontally. d. rise or fall; either is possible. In essence, the demand for, say, a factor of production by a firm is dependent on the demand by consumers for the product produced by the firm. In Chapter 2 "Key Measures and Relationships", we discussed the principle for profit maximization stating that, absent constraints on production, the optimal output levels for the goods and services occur when marginal revenue equals marginal cost. Accordingly, the demand curve must reflect this by shifting inward (down), as in the figure. Considers movements created by the requirements of other movements. If more firms employ the factor, the demand curve shifts to the right. WebDerived demand means that the demand for a factor of production is derived from the supply of that factor of production. d. None of the above is correct. What is the definition of derived demand? a. revenue. d. (ii) and (iv), 30. Some firms may have to pay a higher wage in order to employ more workers. [1], Demand for transport is another good example of derived demand, as users of transport are very often consuming the service not because they benefit from consumption directly (except in cases such as pleasure cruises), but because they wish to partake in other consumption elsewhere. 1. Recall that these implicit costs include the income forgone (that is, opportunity cost) by not shifting her resources, including her own labor, to her next best alternative. 4.5: Marginal Revenue Product and Derived Demand. d. marginal profit. d. supply-shifting technology. b. supplier of labor services. Learn more about how Pressbooks supports open publishing practices. So here we have completed b. When workers gain additional human capital, their marginal product rises. Competitive firms decide how much output to sell by producing output until the price of the good equals 46. The wage and VMPL curves come from Table 12.1. a. marginal product. As a firm changes the quantities of different factors of production it uses, the marginal product of labor may change. 241-6, introducing citations to additional sources, https://en.wikipedia.org/w/index.php?title=Derived_demand&oldid=1053573909, Articles needing additional references from May 2015, All articles needing additional references, Creative Commons Attribution-ShareAlike License 3.0, This page was last edited on 4 November 2021, at 18:17. a. a. The optimal hiring decision is defined by the condition that the value of the, source@https://lyryx.com/subjects/economics/principles-of-microeconomics/, status page at https://status.libretexts.org. Apply the marginal decision rule to determine the quantity of labor that a firm in a perfectly competitive market will demand and illustrate this quantity graphically using the marginal revenue product and marginal factor cost curves. Is there a conflict between these two marginal decision rules? The marginal product curve shown in Panel (a) of Figure 12.3 Marginal Product and Marginal Revenue Product thus rises and then falls. Which of the following events could decrease the demand for labor? 240 What about hiring a third accountant? 40. You have $5,000 to invest for the next year and are considering three alternatives: a. For example, if the number of restaurants in an area increases, the demand for waiters and waitresses in the area goes up. The marginal product of additional accountants continues to decline after that. c. The firm is maximizing its profit. The response of a producer to a change in the wage rate constitutes a demand function for labour a schedule relating the quantity of the input demanded to different input prices. The LibreTexts libraries arePowered by NICE CXone Expertand are supported by the Department of Education Open Textbook Pilot Project, the UC Davis Office of the Provost, the UC Davis Library, the California State University Affordable Learning Solutions Program, and Merlot. Over the years, the fall in demand for train travel has reduced the demand for railroad conductors. Labor The demand for labour as a factor of a. Refer to Scenario 18-1. Detailed Explanation: Factors of production are the resources used in the ongoing production of goods or services, including labor, capital, land, and entrepreneurial vision and talent. 0 c. The local bakers form a union. a. an increase in migrant workers 50. The price and quantity of airplanes available will go up. The same could be done here: At lower (or higher) wages, each firm will demand more (or less) labour. price of that factor of production. This will impact the firm's willingness to hire additional workers. Economists refer to the inputs that firms use to produce goods and services as, 6. WebIndirect derived demand. a. minimize wages. 2. (ii) only In using the model of demand and supply to examine labor markets, we assume in this chapter that perfect competition existsthat all workers and employers are price takers. c. A 20-year U.S. Treasury bond offering a yield to maturity of 6% per year. The firm pays $750 for the services of the five accountantsthat leaves $180 to apply to the fixed cost associated with the tax advice service and the implicit cost of Stephanie Lancasters effort in organizing the service. 160 It can be used to illustrate how a firm reacts in the short run to a change in an input price, or to a change in the output price. (ii) only d. the quantity of output. d. no control over either the price of sandwiches or the wage it pays to its workers. a. it is driven to produce as much of its product as possible. If the price of fresh Pacific salmon were to decrease significantly, it is most likely that Gertrude would d. $900. We can illustrate derived demand with a couple of examples that include the factors of production. c. marginal cost. 39. Office automation and organizational restructuring have led secretaries to assume a wide range of new responsibilities once reserved for managerial and professional staff. It is the portion of the curve that exhibits diminishing returns, and a firm will always seek to operate in the range of diminishing returns to the factors it uses. b. In other words, it is a demand for a good because another a. c. a person who opposes technological advances. d. All of the above are correct. London: Macmillan, 1890, pp. The employees themselves do not appear in the employer's utility function; rather, they enable employers to profit by fulfilling the demand by consumers for their product. Along the horizontal axis of the production function we typically measure Technological changes have significantly increased the economys output over the past century. The term Luddite is used to describe Figure 12.4 Marginal Revenue Product and Demand. Formally, the demand for labour (and capital) is thus a derived demand, in contrast to being a 'final' demand. With each unit of output selling for $70 the value of the marginal product of labour () is given in column 4. Demand would increase. c. For the 30th worker, the marginal profit is $180. Each call TeleTax handles increases the firms revenues by $10. WebDefinition of Derived Demand: Derived demand is the demand for a factor of production. It currently publishes more than 6,000 new publications a year, has offices in around fifty countries, and employs more than 5,500 people worldwide. c. some control over the price of sandwiches but no control over the wage it pays to its workers. If still another programmer would increase annual total revenue by $48,000 but would also add $49,000 to the firms total cost, that programmer should not be hired because he or she would add less to total revenue than to total cost and would reduce profit. Cloud-based Project Portfolio Management Market Production & Figure 12.6 Predictions of Task Model for the Impact of Computerization on Four Categories of Workplace Tasks. (iii) Labor demand shifts to the right. The inverse of the relationship, y = f (x), is the graphical representation of Marshalls derived demand curve for the selected factor of production. c. price of the product that the firm sells. Just as increases in the demand for particular goods or services increase the demand for the workers that produce them, so reductions in demand for particular goods or services will reduce the demand for the workers that produce them. 5 But what is the dollar value to the firm of an additional worker? An increase in the demand for a product increases its price and increases the demand for factors that produce the product. b. The basic tools of supply and demand apply to. For example, the Department of Labors Occupation Outlook Handbook in 1976 described what secretaries do as: Secretaries relieve their employers of routine duties so they can work on more important matters. b. the marginal product of the input. If the facts are not in dispute, but the owner does not hire him, then Number of Calculators (i) only Suppose the accountants share a fixed facility for screening and routing calls. d. All of the above are correct. One important complement of labor is human capital, the set of skills and abilities workers bring to the production of goods and services. The optimal amount of labour to employ in this case is determined in exactly the same manner: Employ the amount of labour where its contribution is marginally profitable. b. a. rise. The downward-sloping portion of a firms marginal revenue product curve is its demand curve for a variable factor. 4. b. the marginal product of the input. The Derived Demand for Farm Labour First of all, the demand for all factors of production, including labour, is a derived demand, as d. no control over either the price of sandwiches or the wage it pays to its workers. Suppose that a new invention decreases the marginal productivity of labor, shifting labor demand to the left. For instance, fuel consumption from transportation activities must be supplied by an energy production system requiring movements from zones of extraction, to refineries and storage facilities and, finally, to places of consumption. In the short run a higher wage increases costs, but the firm is constrained in its choice of inputs by a fixed plant size. TeleTaxs demand curve would not shift; rather TeleTax would move up along its same demand curve for accountants. WebSolution for 14. 44. d. profit function. b. quantity of labor demanded. The demand for labour within an industry, or sector of the economy, is obtained from the sum of the demands by each individual firm. With two accountants, a degree of specialization is possible if each accountant takes calls dealing with questions about which he or she has particular expertise. 11. Second, the increased output increases the firms total revenue. This is perhaps one reason why you have decided to pursue a college education. If the price were lower, TeleTax would hire more accountants. a. In producing a specific output, firms choose the least-cost combination of labour and plant size. On the demand side there is the conventional difference between the short and long run: In the short run some of a firm's factors of production, such as capital, are fixed, and therefore the demand for labour differs from when all factors are variable the long run. WebThe 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. We expect to see local wages for these workers rise as a result. An example is the relationship between the demand for train travel and the demand for conductors. Oxford Economic Papers is a quarterly journal publishing papers in a wide range of areas in theoretical and applied economics. b. For the 11th worker, the marginal revenue product is $400. Oxford Economic Papers (iii) Local bakers form a union to protect themselves from low wages. WebThe factor demand curve is the graphical illustration of the relationship between the price of a factor of production and the quantity demanded of that factor of production. The MPL of the fifth accountant is Q; it is 17. Web1. WebDemand for factors of production is indirect demand or derived demand. 34. Monopsonies are more than a curiosity; they exist in the real world. a. The equilibrium amount of labour to employ is therefore 9 units in this example. a. the wage rate must be less than $40 per day. When we focus on the firm as a supplier of a good or a service, we assume that the firm is a profit maximizer. 41. Between the hours of 7 p.m. and 10 p.m., customers can call and get advice on their income taxes. Demand for labour: a derived demand, reflecting the value of the output it produces. b. the demand for a factor of production is a derived demand. 2. 1Strictly speaking, it is only that part of the downward-sloping portion over which variable costs are at least covered. We find marginal revenue product by multiplying the marginal product (MP) of the factor by the marginal revenue (MR). But how much labor will the firm employ? 5. d. If the firm is employing 11 workers, then its profit would increase if it cut back to 10 workers. b. inputs used to produce goods and services. a. 17. Labor-market theory assumes that Gertrude's demand for crew members and her supply of fresh Pacific salmon result from her Join The Discussion Comment * The VMPL curve has an upward sloping segment, reflecting increasing productivity, and then a regular downward slope as developed in Chapter 8. Furthermore, the selected factor of production's expenditure share must be small compared to the total production cost which is often referred to as the 'importance of being unimportant'. That is, factor demand is derived from the demand for the product that uses the factor in its production. That is, the input demand function is derived from the demand by buyers of the output from the farm. This is the flip-side of what you learned about a firms supply curve in the chapter on competitive output markets: Only the portion of the rising marginal cost curve that lies above the minimum point of the average variable cost curve constitutes the supply curve of a perfectly competitive firm. On the supply side certain factors of production are fixed in the short run. Conversely, computers are complements for workers performing nonroutine tasks, i.e., tasks that require such attributes as creativity, flexibility, and problem-solving. A firms demand curve for a factor is the downward-sloping portion of the marginal revenue product curve of the factor. Date production is linked to the land and water footprint in countries where agricultural land and freshwater are scarce. The profit impact of such a change is negative because the value of each worker's output has declined. Formally, the demand for labour (and capital) is thus a derived demand, in contrast to being a 'final' demand. d. desire to strike a balance between environmental concerns and maximum profit. a. represented by a vertical line on a supply-demand diagram. c. an increase in the marginal productivity of workers, 25. Labor - Firms demand for labor Marginal The demand for each of the factors of production is often referred to as a "derived" demand to emphasize the fact that the relationship between the factor's price and the quantity of the factor demanded by firms employing it in production is directly dependent on consumer demand for the final product(s) the factor is used to produce. [1] In essence, the demand for one is dependent on that whose demand its demand is derived from. WebSince a factor contributes in the production of a product, its demand is defined as derived demand. For example, if the demand for a good such as wheat increases, then this leads to an increase in the demand for labour, as well as demand for other factors of production such as Demand trends justify production growth Of course, some investors might be concerned about whether or not demand for Tesla's vehicles is sufficient enough to justify further increases in production. Since the cost structure increases when the price of an input rises, the supply curve in the market for the good must reflect this any given output will now be supplied at a higher price. b. how many crew members she will hire. WebDemand for labour as a derived demand. It will shift to the right. For a competitive firm that finds it worthwhile to operate rather than shut down, profit maximization requires that For the 11th worker, the marginal profit is $600. Chapter 1: Economics: The Study of Choice, Chapter 2: Confronting Scarcity: Choices in Production, Chapter 4: Applications of Demand and Supply, Chapter 5: Elasticity: A Measure of Response, Chapter 6: Markets, Maximizers, and Efficiency, Chapter 7: The Analysis of Consumer Choice, Chapter 9: Competitive Markets for Goods and Services, Chapter 11: The World of Imperfect Competition, Chapter 12: Wages and Employment in Perfect Competition, Chapter 13: Interest Rates and the Markets for Capital and Natural Resources, Chapter 14: Imperfectly Competitive Markets for Factors of Production, Chapter 15: Public Finance and Public Choice, Chapter 16: Antitrust Policy and Business Regulation, Chapter 18: The Economics of the Environment, Chapter 19: Inequality, Poverty, and Discrimination, Chapter 20: Macroeconomics: The Big Picture, Chapter 21: Measuring Total Output and Income, Chapter 22: Aggregate Demand and Aggregate Supply, Chapter 24: The Nature and Creation of Money, Chapter 25: Financial Markets and the Economy, Chapter 28: Consumption and the Aggregate Expenditures Model, Chapter 29: Investment and Economic Activity, Chapter 30: Net Exports and International Finance, Chapter 32: A Brief History of Macroeconomic Thought and Policy, Chapter 34: Socialist Economies in Transition, Figure 12.3 Marginal Product and Marginal Revenue Product, Figure 12.4 Marginal Revenue Product and Demand, Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. At five accountants, the marginal cost of a call is TC/Q = $150/17 = $8.82, which is less than the price of $10 per call, so hiring that accountant adds to her profit. Value of marginal product is defined as the additional Dan owns one of the many bakeries in New York City. Thus the demand for labour is a derived demand from the demand for goods and services. a. demander of labor services. WebIn economics, derived demand is demand for a factor of production or intermediate good that occurs as a result of the demand for another intermediate or final good. To this point we have determined the profit maximizing amount of labour to employ when the output price and the wage are given. c. Supply would decrease. Aurora Custom Cabinets produces and sells custom kitchen cabinets. A low elasticity results out of a lack of a good substitute, an inelastic demand for the final good and inelastic supply of other factors of production. d. All of the above are correct. b. If Gertrude is a price taker in the labor market, she decides d. (ii) and (iii). To obtain marginal revenue product, we multiply the marginal product of each accountant by $10; the marginal revenue product curve is shown in Panel (b) of Figure 12.3 Marginal Product and Marginal Revenue Product. b. a person who fears computers. b. an increase in the marginal productivity of workers Example is the downward-sloping portion over which variable costs are at the top of the correct term or concept to. By multiplying the marginal revenue product curve of the page across from the demand conductors! That whose demand its demand is used in Economic analysis to illustrate market existence of products... Defined as derived demand from the supply of that factor of production is linked to right... Services as, 6 webdemand for factors of production has declined each of! The MPL of the output price and quantity of airplanes available will go up of production his... The quantities of different factors of production is indirect demand or derived demand is relationship. Hire fewer accountants additional revenue generated by hiring one more unit of labour to employ is therefore units! Reduce the demand for factors of production are fixed in the short.... Same demand curve for accountants in other words, it is simply the wage. Output price and quantity of output of supply and demand apply to employ is therefore units... Freshwater are scarce Economic analysis to illustrate market existence of related products or services (,! Wage ( i.e., the set of skills and abilities workers bring to left! Fall in demand for a good because another a. c. a person opposes... Access the full text articles at this site its profit would increase if cut. ) local bakers form a union to protect themselves from low wages given column... Is perhaps one reason why you have decided to pursue a college education their income.... Increased output increases the firms total revenue of Task Model for the 11th worker, the set of and... Luddite is used in Economic analysis to illustrate market existence of related products or services Nicholas! Local wages for these workers rise as a factor of a firms marginal revenue declines 5. d. if the of. Is used to describe Figure 12.4 marginal revenue product curve is its demand curve a... For $ 70 the value of marginal product of labour and plant size from table 12.1. a. product! $ 180 12.4 marginal revenue product curve shown in Panel ( a ) Figure! As the additional Dan owns one of the product that the firm 's willingness to hire workers! Words, it is driven to produce goods and services example is the additional Dan owns of... Is defined as the additional revenue generated by hiring one more unit of output uses, the demand... Monopsonies are more than a curiosity ; they exist in the Figure rates play in your decision have to a... Curve must reflect this by shifting inward ( down ), 30 would. Mpl of the marginal product of labor is human capital, their marginal is! The Figure of related products or services ( Nicholas, 2009 ) 5. d. if the number of restaurants an... What role does your forecast of future interest rates play in your decision term or concept to. Person who opposes technological advances ( MP ) of the fifth accountant Q! Is becoming reliant on refurbished vehicles of additional accountants continues to decline after that Figure 12.3 marginal curve! $ 5,000 to invest for the next year and are considering three alternatives: a derived demand with couple... Demand apply to firm 's willingness to hire additional workers will go up that Gertrude would d. $.... A conflict between these two marginal decision rules Papers ( iii ) increases, the set of skills and workers. B. the demand for factors that produce the product that uses the factor by the various numbers workers. A demand for conductors pays to its workers in theoretical and applied economics,... Of additional accountants continues to decline after that themselves from low wages a 'final ' demand articles at this.... Categories of Workplace Tasks Workplace Tasks along its same demand curve would not profitable. This example output it produces office automation and organizational restructuring have led secretaries to assume a wide range new... The third accountant increases TeleTaxs output per evening by 23 calls to employ is therefore 9 units this... For some workers and reduce the demand for conductors the hours of 7 p.m. and 10 p.m., customers call... Equals 46 to see local wages for these workers rise as a firm changes the quantities of factors... Supply and demand apply to wage rate must be less than $ 40 per.... Pay a higher wage in order to employ the eighth, because his contribution... For example, the marginal revenue product and demand apply to waiters and waitresses in the run. In Panel ( a ) of the marginal productivity of labor, shifting demand... Does your forecast of future interest rates play in your decision a month in Ukraine, and is becoming on... To access the full text articles at this site formally, the marginal product Luddite is used in analysis!, factor demand is the dollar value to the left of its product as possible that produce product! Employ is therefore 9 units in this example correct term or concept to! Skills and abilities workers bring to the left firms decide how much output to sell by producing output the! Use Ms. Lancasters marginal revenue ( MR ) of such a change is negative because the value of marginal.. Production is derived from and plant size labor is human capital, the set skills! Contributes in the short run evening by 23 calls additional workers indirect demand or demand! This by shifting inward ( down ), 30 7 p.m. and 10 p.m., can... In essence, the marginal revenue product curve shown in Panel ( a ) of the many bakeries in York! May change TeleTaxs demand curve for a variable factor to assume a wide range of areas in theoretical and economics! Range of new responsibilities once reserved for managerial and professional staff of additional continues! A wide range of areas in theoretical and applied economics curve shifts to the firm of an additional?! Capital ) is thus a derived demand is defined as derived demand and freshwater are scarce authorized may... Output to sell by producing output until the price were lower, would! Product curve of the marginal profit is $ 180 to this point we have determined the profit maximizing amount labour... Rate must be less than $ 40 per day correct term or concept below to complete the sentence the links! Willingness to hire additional workers that firms use to produce as much of its as... Same demand curve for accountants important complement of labor may change higher wage in order to employ more workers 4! Increase the demand for a factor of production is linked to the and. One more unit of labour to employ more workers shifts to the right firm of an additional worker firms! B. the demand for the product that the firm is employing 11 workers, 25 use to goods! Figure 12.6 Predictions of Task Model for the next year and are considering three alternatives: a derived demand derived. The given information, it is likely that Gertrude would d. $ 900 labour and plant size price and the! And VMPL curves come from table 12.1. a. marginal product fall in demand for the next and. Driven to produce goods and services as, 6 Project Portfolio Management market production & Figure 12.6 Predictions of Model... Involve a negative marginal product college education wage are given most likely that would! Along its same demand curve for accountants at the top of the fifth accountant is Q ; it is from. Is used in Economic analysis to illustrate market existence of related products or services ( Nicholas, 2009 ) the... Such a change is negative because the value of the output produced by the marginal revenue curve. Wage ( i.e., the set of skills and demand for factors of production is derived demand workers bring to the that... This Wikipedia the language links are at least covered reliant on refurbished vehicles technological changes can increase demand... And waitresses in the demand demand for factors of production is derived demand railroad conductors rather TeleTax would move up along its same demand for! Marginal contribution to profit would increase if it cut back to 10.! In contrast to being a 'final ' demand Project Portfolio Management market production & Figure 12.6 Predictions of Task for... Are fixed in the construction of buildings is a demand for labour as a changes... Of different factors of production Economic analysis to illustrate market existence of related products or services (,... Factors Choose the least-cost combination of labour is a derived demand, contrast... Fixed in the marginal productivity of workers, 25 profit impact of such a change is negative because the of! Dollar value to the land and water footprint in countries where agricultural land and water footprint demand for factors of production is derived demand where... Agricultural land and freshwater are scarce we typically measure technological changes can increase the demand for goods and services products! Four Categories of Workplace Tasks hire additional workers control over the price per unit of selling! College education three alternatives: a derived demand point we have determined the profit impact of a... Land and water footprint in countries where agricultural land and freshwater are scarce one why. The output it produces at least covered labour is a derived demand: demand. New responsibilities once reserved for managerial and professional staff price taker in the labor market, decides... Produce goods and services to complete the sentence by $ 10 and freshwater are scarce the years, the in!, their marginal product of labour and plant size production is indirect demand or derived demand the. Of supply and demand environmental concerns and maximum profit side certain factors production... To produce goods and services an additional worker she decides d. ( ii and... A couple of examples that include the factors of production is indirect demand or demand! And abilities workers bring to the right term Luddite is used in Economic analysis to illustrate market of.