Microeconomics - Factor Markets

A firm's demand for inputs is often referred to as a derived demand. This means that a firm requires intputs to produce goods or services because there is a demand for those goods or services. So, the demand for inputs is derived from the demand for outputs.

This idea of derived demand may seem like just a matter of language but it turns out to be crucial in understanding how the demand for inputs arises and how factor demand changes when demand for outputs changes.

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