Give reason "Demand for factors of production is derived demand."
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The demand for factors of production is derived demand, while demand for products is direct demand. Moreover, the demand for the factors of production is joint demand. This is because a product cannot be produced using a single factor of production.
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Demand for factors of production is derived demand as its demand depends on the demand for the final product.
The factors of production such as land, labour, capital and entrepreneur are required for the production of any goods or services. Hence, these are the intermediate goods or services and hence their demand demands on the demand for the final product.
For example: The demand for a sweater during winters is a direct demand whereas the machines, raw materials, labourers, etc. required for its production are associated with derived demand.
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