Explain the follow questions:

The demand for inputs is derived from the market demand function

With inelastic demand, a price increase produces lower marginal and total revenue

Two products are complements if the cross-price elasticity of demand equals zero

1. The demand for inputs is a derived demand from the market demand because the demand of inputs is based on the demand of the output in the market. When the demand of the output is more in the market, it will lead to an increase in demand of inputs of the firms. The firms will analyze its market demand function and will determine the capital labor ratio required for producing the demanded quantity.

2. When the demand of a good or service is inelastic any increase in the price will lead to an increase in its total revenue. It is because the goods with inelastic demand are mostly those which do not have close substitutes. So, increase in price may change the demand with very less proportion or there will be no change in the demand. The marginal revenue will increase with the same rate as the increase in the price.

3. The statement is not true.

It is because the cross-price elasticity of demand of two goods is zero when the goods are unrelated to each other. The increase in price of one good will not affect the demand of the other good. On the contrary, the cross-price elasticity of demand for complementary good is negative. It means a proportionate increase in the price of one good will lead to proportionate decline in the demand for the other good.