Question

1a. Distinguish a change in the quantity demanded of any factor of production (labor, capital, land, entrepreneur) from a change in demand for and factor of production.

1b. Distinguish a change in the quantity supplied of any factor of production (labor, capital, land, entrepreneur) from a change in supply of and factor of production.

1c. Which one of them gives the best and clearest explanation of a change in demand as opposed to a change in quantity demanded?

1d. Why is the demand for a factor of production called derived demand? Explain with a brief example.

Answer 1

Answer 1A) Change in demand - change in demand for factor for production take place due to change in income , expectations. for example- demand for capital can be increased with increase in expected profits from the investment of capital.

Change in quantity demanded - Change in quantity demanded for factor of production take place due to change in the price of factor of production. For example, increase in labor demand can take place with the decrease in the wages.

Answer 1b)

Change in supply - change in supply factor for production take place due to change in technology, expectations.

Change in quantity supplied  - Change in quantity supplied for factor of production take place due to change in the price of factor of production.

Answer 1D) demand for factor of production is derived demand because factor of production help in producing the goods. For example, labor demand is derived demand because labor help in production by giving its services.