The demand for factors of production is said to be

1. Analyze the question The question asks what kind of demand describes the demand for factors of production (land, labour, capital, entrepreneur).

2. Explain the concept Factors of production are not wanted for their own sake. Firms demand them because of what they can produce, and that output is what consumers want. So the demand for a factor depends on the demand for the good or service it helps to make. This is called derived demand.

3. Step-by-step solution

• Example: A bakery in Lagos hires bakers and buys flour and ovens because people want bread. If demand for bread falls, the bakery needs fewer bakers and less flour, so demand for those factors falls too.
• Check each option: • A. Competitive demand is when goods are substitutes, such as Gala and sausage rolls. This does not describe factor demand. • B. Complementary demand is when goods are used together, such as car and petrol. This is not the general description. • C. Composite demand is when a good has several uses, such as wood or electricity. This is not it. • D. Derived demand is demand for something because of the demand for what it produces. This fits. • E. Joint demand is demand for goods used together, such as bread and butter. This is not it.

4. Answer The demand for factors of production is derived, so the correct option is D.

5. Exam tip Remember "Derived = Depends": demand for factors depends on demand for the final product. The words "factors of production" in a question about demand almost always point to derived demand.