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40. which one of the following is not the determinant of factor demand? (1) derived demand (2) productivity of factor (3) work-leisure ratio (4) degree of subst
40. Which one of the following is not the determinant of factor demand? (1) Derived demand (2) Productivity of factor (3) Work-leisure ratio (4) Degree of substitutability
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Nidhi taparia Best Answer
The correct answer is (3). Work-leisure ratio determines the supply of factor, not demand. Derived demand means demand for the commodity the factor of production helps produce. When derived demand is high, factor demand will also be high and vice versa. For example, software applications are in demand these days. Hence software engineers are also in great demand. Productivity of factor is the major determinant of factor demand. When factor productivity is high, so is the factor demand. For example, an educated person is considered more productive than an uneducated one. Hence demand for such a person is high. Degree of substitutability also affects factor demand positively.