In
economics, a
conditional factor demand is the cost-minimizing level of an input (
factor of production) such as
labor or
capital, required to produce a given level of
output, for given unit input costs (
wage rate and rental rate) of the input factors. A
conditional factor demand function expresses the conditional factor demand as a
function of the output level and the input costs. The conditional portion of this phrase refers to the fact that this function is conditional on a given level of output, so output is one argument of the function. Typically this concept arises in a
long run context in which both labor and capital usage are choosable by the firm, so a single optimization gives rise to conditional factor demands for each of labor and capital.