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In 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. [1] 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.
Because labor is the most important factor of production, this article will focus on the competitive labor market, although the analysis applies to all competitive factor markets. Labour markets are not quite the same as most other markets in the economy since the demand of labour is considered as a derived demand.
In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, goods and services. The utilised amounts of the various inputs determine the quantity of output according to the relationship called the production function .
Demand represents the amount of that thing that consumers want to buy. When more people want it and fewer people have it, the price goes up. When fewer people want it or more people start selling ...
Production can be either increased, decreased or remain constant as a result of consumption, amongst various other factors. The relationship between production and consumption is mirror against the economic theory of supply and demand. Accordingly, when production decreases more than factor consumption, this results in reduced productivity.
Supply chain as connected supply and demand curves. In microeconomics, supply and demand is an economic model of price determination in a market.It postulates that, holding all else equal, the unit price for a particular good or other traded item in a perfectly competitive market, will vary until it settles at the market-clearing price, where the quantity demanded equals the quantity supplied ...
In the long run, all factors of production are variable and subject to change in response to a given increase in production scale. In other words, returns to scale analysis is a long-term theory because a company can only change the scale of production in the long run by changing factors of production, such as building new facilities, investing ...
Natural (physical, etc) and institutional constraints impose limits to growth. If actual GDP rises and stays above potential output, then, in a free market economy (i.e. in the absence of wage and price controls), inflation tends to increase as demand for factors of production exceeds supply.