Which of the following statements best illustrates the concept of derived demand?
A decline in the demand for shoes will cause the demand for leather to decline.
When economists say that the demand for labor is a derived demand, they mean that it is
related to the demand for the product or service labor is producing.
The demand for a resource depends primarily on
the demand for the product or service that it helps produce.
Marginal resource cost is
the increase in total resource cost associated with the hire of one more unit of the resource.
The change in a firm's total revenue that results from hiring an additional worker is measured by
the marginal revenue product.
The labor demand curve of a purely competitive seller
slopes downward because the marginal product of successive workers declines.
A competitive employer is using labor in such an amount that labor's MRP is $10 and its wage rate is $8. This firm
should hire more labor because this will increase profits.
The labor demand curves show slope downward because of the
law of diminishing returns.
Other things equal, a decrease in the price of a substitute resource would cause a
shift the demand curve to the right assuming the output effect exceeds the substitution effect.
Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries. We could expect the
MRP curve to shift to the right.
What does not shift the demand curve for labor?
A change in the wage rate.
When the elasticity coefficient for resource demand is greater than one, resource demand is
elastic.
Resource X has many close substitutes, whereas resource Y has no close substitutes. Other things equal, we would expect
the demand for resource X to be more elastic than the demand for resource Y.
The elasticity of resource demand measures the
responsiveness of producers to changes in resource prices.
The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal,
the more elastic the demand for the product, the more elastic the demand for labor.