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Difficulty: MediumTypes of Demand

An increase in the global market demand for chocolate leads to higher production targets for processing firms, which subsequently prompts cocoa farmers to hire additional farm workers. What type of demand is exhibited by farm labour in this economic scenario?

  1. Derived demandAnswer
  2. B
    Competitive demand
  3. C
    Joint demand
  4. D
    Composite demand

Answer

Derived demand
Derived demand occurs when the demand for a factor of production or intermediate commodity arises directly from the demand for another final good or service. In this scenario, farm labour is requested because consumers want chocolate.

Step-by-Step Solution

1
Identify the relationship between the primary product and the factor of production
Farm labour is a factor of production required to cultivate cocoa, which is processed into chocolate.
Understanding why the demand for labour arose requires tracing it back to consumer demand for the final output.
2
Classify the type of interrelated demand
The demand for labour increases direct result of the increased demand for chocolate.
When the demand for a factor of production depends directly on the demand for the good or service it produces, it is defined as derived demand.

Key Concept

Derived Demand
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Topics

Types of Demand

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