Final answer:
The demand for labor is a derived demand because it is based on the demand for the goods and services produced. This means that if there is an increase in demand for certain goods or services, the demand for labor to produce those goods or services will also increase. The correct answer is option D. The demand for labor comes from the demand for output.
Step-by-step explanation:
The demand for labor is a derived demand because it is dependent on the demand for the goods and services that workers produce. For instance, if there is an increase in the demand for new automobiles, automakers will need to hire more workers to meet production needs. Thus, the correct answer to the student's question is D.
The demand for labor comes from the demand for output. Derived demand for labor can be seen across various industries, such as the need for chefs rising with the demand for restaurant meals, or the need for attorneys growing with the demand for legal services.