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# The demand for all goods and services

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1. What does it mean to say that the demand for resources
is a derived demand? Is the demand for all goods and
services a derived demand?

2. Using the information in the following table, calculate
the marginal revenue product (MRP = MPP X MR).

Units of Resource
Resources Total Output Price Price
1 10 \$5 \$10
2 25 \$5 \$10
3 35 \$5 \$10
4 40 \$5 \$10
5 40 \$5 \$10

3. Using the data in exercise 2, determine how many units
of resources the firm will want to acquire.

4. Suppose the output price falls from \$5 to \$4 to \$3 to \$1
exercises 2 and 3?

5. Using the data in exercise 2, calculate the marginal
factor cost.

6. Suppose the resource price rises from \$10 to \$12 to \$14
to \$18 to \$20 as resource units go from 1 to 5. How

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#### Solution Preview

1. What does it mean to say that the demand for resources is a derived demand? Is the demand for all goods and services a derived demand?

Ans: The demand for resources (like labour or capital resources) is a derived demand as it is derived from the demand for the goods and services that it is used to produce. The quantities of factors of production demanded are a consequences of firms' output decisions. A firm hires the quantity of factor of production that maximize its profits.

The demand for all goods and services is not a derived demand unless they are demanded for producing something else.

2. Using the information in the following table, calculate
the ...

#### Solution Summary

The demand for all goods and services is featured.

\$2.19