The demand for a finished commodity such as bread is called a direct demand, but in microeconomics the demand for a factor of production such as labour or machinery, which arises because of the demand for the final product, is known as what type of demand?

Introduction / Context:
In microeconomics, it is important to distinguish between different forms of demand. Consumers demand final goods and services directly for their own satisfaction, while firms demand inputs such as labour, land, and capital because these inputs help to produce final goods. This difference is captured by the terms direct demand and derived demand. The question asks you to name the type of demand associated with factors of production like labour or machinery.

Given Data / Assumptions:

• Demand for a commodity like bread is referred to as direct demand, because consumers want it for its own sake.
• Demand for factors of production (for example, labour, machines, raw materials) arises because they are needed to produce goods and services that consumers or other firms want.
• The options list cross demand, joint demand, derived demand, independent demand, and complementary demand.
• We use standard definitions from microeconomic theory.

Concept / Approach:
When the demand for a good or service arises not for its own sake but because it helps to produce another good that is in demand, economists call this derived demand. For example, the demand for steel is derived from the demand for cars, bridges, and machinery in which steel is used. Similarly, the demand for labour in a factory is derived from the demand for the products that factory makes. Direct demand, by contrast, is the demand for goods like food or clothing that are desired for final consumption.

Step-by-Step Solution:
Step 1: Identify that the demand in question is for a factor of production, not a final consumer good.Step 2: Recognise that firms hire labour, buy machinery, and purchase raw materials because they wish to produce goods and services that will be sold in the market.Step 3: This means the demand for the factor depends on, or is derived from, the demand for the final product.Step 4: The technical term for demand that originates in this way is derived demand.Step 5: Cross demand is used when the demand for one good is related to the price of another good (for example, substitutes and complements).Step 6: Joint demand occurs when two goods are demanded together, like cars and petrol.Step 7: Independent demand refers to demand that does not depend on any other product, which is not the case here.Step 8: Therefore, the correct answer is derived demand.

Verification / Alternative check:
Textbooks on microeconomics and business economics often give examples such as the demand for bricks being derived from the demand for houses, or the demand for teachers being derived from the demand for education services. In labour economics, the entire analysis of how many workers a firm hires is based on the idea that labour demand depends on the marginal revenue product of labour, which in turn depends on the demand for the firm output. These examples consistently use the term derived demand, confirming the correctness of this term for factor demand.

Why Other Options Are Wrong:
Cross demand: This describes how the demand for one good responds to the price change of another related good, not how input demand arises from output demand.

Joint demand: This occurs when two goods are demanded together for joint use, such as printer and ink, which is different from factor demand.

Independent demand: This refers to demand that does not depend on the demand for any other product; factor demand clearly does depend on final product demand.

Complementary demand: This term is not a standard classification in basic demand theory; instead, the relationship between complementary goods is captured through cross demand.

Common Pitfalls:
Students sometimes confuse derived demand with joint demand or complementary demand because all involve relationships between goods. The key is to remember that derived demand refers to input output relationships (for example, labour and the goods produced), while joint or complementary demand refers to goods that are used or consumed together. Keeping this distinction in mind makes it easier to answer factor demand questions correctly in exams.

Final Answer:
The demand for a factor of production is called derived demand.