Derived Demand for Factors

Steps:

• Recall that demand for factors of production is derived from the demand for the goods they produce.
• Identify shifts in factor demand: increases come from higher product demand, cheaper complements, or better technology.
• Evaluate each option: check if it shifts the demand curve rightward for the factor.
• Select the option that directly links to rising product demand.

Why C is correct:

• Factor demand is derived demand; by the law of derived demand, an increase in demand for the produced good raises the marginal revenue product of the factor, shifting its demand curve right.

Why the others are wrong:

• A: A decrease in the price of an alternative factor makes substitutes cheaper, decreasing demand for this factor.
• B: Lower efficiency reduces the factor's marginal product, decreasing its demand.
• D: An increase in the factor's price moves along the demand curve, reducing quantity demanded but not shifting demand.

Final answer: C