Explain the follow question 1. Derived demand is directly determined by the prof

Question

Explain the follow question

1. Derived demand is directly determined by the profitability of using inputs to produce output

2. The demand for inputs is derived from the market demand function

3. With inelastic demand, aprice increase produces lower marginal and total revenue

4. Two products are complements if the cross-price elasticity of demand equals zero

5. When Px=$100, MPx=10 and MRq=$5, the marginal revenue product of X equals

6. The returens to scale charcateristic of a production system, shows the relation between output and the variation in all inputs

7. Returens to a factor denotes the relation between the quantity of an individual input employed and the level of output produced.

8. The marginal product concepts is the change in output associated with a one-unit change in an individual facort

9. Learning involves shift in LRAC curves over time

Explanation / Answer

Q1. Derived demand is directly determined by the profitability of using inputs to produce output implies that demand for inputs is derived demand and it depends on profitability of firm concerned. If usage of inputs to produce output leads to cost reduction or cost saving and enhances the profitability of firm concerned then such firm will increase its demand for inputs.

On the other hand, if usage of inputs to produce output leads to cost increase thereby reducing the profitability of firm concerned then such firm will decrease its demand for inputs.

Thus, profitability determines the demand for inputs. Increase in profitability increases the demand for input and vice-versa.

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