The demand for a factor is derived from the demand for the product
Firms hire workers only because customers want to buy what those workers produce. Labour demand depends entirely on product demand — economists call this derived demand.
Real World
During the UK housing boom of 2021–22, record demand for new homes caused a surge in demand for bricklayers and scaffolders — their wages rose not because their skills changed, but because consumers wanted more houses.
Exam Focus
Always state 'labour demand is derived from product market demand' explicitly — examiners reward this precise terminology.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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