When economists say that the demand for labor is a derived demand, they mean that it is rev: 06_21_2018 Multiple Choice dependent on government expenditures for public goods and services. related to the demand for the product or service labor is producing. based on the assumption that workers are trying to maximize their money incomes. based on the desire of businesses to exploit labor by paying below equilibrium wage rates.

related to the demand for the product or service labor is producing.

Explanation:

Derived demand is demand for a good or service that is dependent on the demand for another good..

Demand for labour is an example of derived demand.

Labour is needed to produce good and services. If no good is been demanded, firms would not hire labour.

For example, a bakery that produces bread hires labour. Suddenly, there is a rumour that bread is not healthy, so people stop buying bread. As a result, the bakery closed down and did not demand any labour.

In another scenario, it is rumoured that bread increases IQ. As a result, the demand for bread soars. The bakery increases production and hires more labour.

In both scenarios, the demand for labour was dependent on the demand for bread

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