2. The demand for resources is derived from the demand for the products that the resources help to produce. The quantity of a resource demanded is negatively related to its price. If the price of a resource increases, less of it will be used for two reasons. First, producers will substitute other resources for the now more expensive input (substitution in production). Second, the higher input price will lead to higher prices for products that the resource helps to make, causing consumers to reduce their purchases of these goods

(substitution in consumption) .