Treat factor demand as derived from the goods or services produced, then compare input price, availability and productivity when explaining a firm's labour-capital choice.
Free goods and economic goods are consumed in Poland. In 2020, demand for both economic goods and factors of production increased in Poland. For example, Polish consumers demanded more football shirts and the Polish government increased its spending on housing for the country's population.
Explain two influences on demand for factors of production.
Explain two influences on demand for factors of production.
Logical explanation which might include:
Demand for the product produced / total demand / economic activity (1) rise in demand for the product/products will be likely to increase demand for the factor/factors of production / derived demand (1).
Price of the factor itself (1) lower price will be likely to result in higher demand (1).
Price of substitute factors of production (1) e.g. may demand more labour if price of capital rises (1).
Price of complementary factors of production (1) e.g. if labour is used with capital, a fall in the price of capital may increase demand for labour (1).
Productivity (1) higher productivity will be likely to increase demand (1).
Quality / advances in technology / changes in standards of education and training (1) higher quality will increase demand (1).
Occupational mobility (1) the more occupationally mobile, the higher demand will tend to be (1).
Method of production (1) switch from labour-intensive production will increase demand for capital goods (1).
4
One mark each for each of two influences identified and one mark for each of two explanations.
If more than 2 influences are given, consider the first 3 .
Accept price and / or demand on its own but looking for price of a complement or price of a substitute not just complement or substitute.