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.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved