PERAS, CARLA L.

B2019

Principles of economics

1.) Why is the demand for inputs a derived demand?

To emphasize the fact that the relationship between the factor's price and the quantity of the factor
demanded by firms employing it in production is directly dependent on consumer demand for the final
product(s) the factor is used to produce.

2.)How are the prices of inputs determined in a market economy?

Market prices are dependent upon the interaction of demand and supply.

3.)If the market wage rate is higher than the equilibrium wage rate, a surplus f labor results. Is the
statement true or false? Explain.

True, because if the market wage rate is higher than the equilibrium wage rate then the jobs available
will decrease meanwhile the labor increases resulting in a surplus of labor for workers.

4.)Why is the supply of land perfectly inelastic?

Since suppliers can only sell what they have they cannot create more, regardless of the price, although a
higher price would induce more landowners to sell. Supply inelasticity can be more accurately defined as
a supply that does not change in response to demand.

5.)Why is the quantity supplied of loanable funds directly related to the interest rate?

The quantity of loanable funds supplied increases as the interest rate increases. When deciding on how
much to save, an individual looks at the benefit that they can get by saving. As the interest rate
increases, the benefit that you get through saving increases (higher interest earnings) and this tends to
encourage people to save more.