Try again
Correct
Try again
Try again
Solution:
The demand for labor in response to the wage rate is called derived demand because the demand for labor is derived from the demand for the goods and services that labor is used to produce. As the wage rate increases, firms may reduce the quantity of labor demanded because the cost of production has increased, and they may substitute labor with other inputs, such as technology or capital. This is a typical scenario in most labor markets.
On the other hand, the demand for the same labor in response to the price of electronic goods, where labor enters as an input, is called direct demand because labor is directly used in the production of electronic goods. If the price of electronic goods increases, firms may increase their production, leading to an increase in the demand for labor.
So, the demand for labor can be characterized as derived demand or direct demand depending on whether labor is used as an input in the production of goods or services.
Correct option is (b)