Derived Demand - Definition, What is Derived Demand, Advantages of Derived Demand, and Latest News - ClearTax (2024)

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Derived Demand - Definition, What is Derived Demand, Advantages of Derived Demand, and Latest News - ClearTax? ›

Derived demand refers to the demand for any goods or services, which is derived from any related goods, services, or intermediate goods or services. In the case of derived demand, a market can exist for both intermediate and related goods or services.

Derived demand occurs when demand for a good or service affects demand for a related good or service. Comprised of raw materials, processed goods, and labor, derived demand can influence the demand for its associated components, the technology needed for production, and the derived product's market price.

Derived Demand. The demand for a resource that arises from the demand for the good produced by the resource. Ex. The demand for truck drivers arises from the demand for transporting goods.

The chain of derived demand refers to the flow of raw materials to processed materials to labor to end consumers. When consumers show a demand for a good, the necessary raw materials are harvested, processed, and assembled. For example, consumer demand for clothing creates a demand for fabric.

Whenever several items are required to make a particular commodity, the demand for various commodities is termed as the 'Derived Demand'. For example, the demand for building is a direct demand and demands for cement, bricks, sand, timber, labour, etc., are called as derived demands.

Derived demand is demand that comes from (is derived) from the demand for something else. Thus, the demand for machinery is derived from the demand for consumer goods that the machinery can make. If there is low demand for consumer goods, there is low demand for the machinery that can make them.

Derived factors define how to calculate certain eligibility criteria that change over time, such as a person's age or length of service. You add derived factors to eligibility profiles and then associate the profiles with objects that restrict eligibility.

Derived demand is the demand for inputs resulting from the demand for the final product.

The demand for resources is a derived demand because the demand for a resource is present because there is a demand for the goods that it can produce. For example, there is a demand for lumberjacks because there is a demand for furniture made using the wood provided by lumberjacks.

The relationship between primary demand and derived demand is somewhat simple. Primary demand is the demand (request for a product) made by consumer for a product. Derived demand links with the increasing or decreasing of consumer demand for a particular product.

What is derived demand directly determined by? ›

Hence, derived demand is dependent on the demand for an intermediate good or service. Derived demand can also be for one of the factors of production, such as raw materials, land, labour, capital. For example, the demand for raw material is directly related to the demand for the final product.

For example, if a consumer is hungry and buys a slice of pizza, the first slice will have the greatest benefit or utility. With each additional slice, the consumer becomes more satisfied, and utility declines.

Joint demand refers to goods that are consumed together simultaneously, like bread and butter. On the other hand, derived demand relates to goods whose consumption depends on the production or use of another product, such as labor required for manufacturing.

In B), demand for computers and more powerful computers come from the same source, which is individual's demand for technology. Hence, in this case, demand is not derived.

A car manufacturer will have a derived demand for manufacturing equipment, components, steel, lubricants and the like.

Answer and Explanation:

Answer is b. An increase in the demand for bread leads to an increase in the demand for flour. When there is an increase in the demand for a product, then there is an increase in the demand for all inputs used in the production of that product.

Direct and derived demand. Direct demand is the demand for a final good. Food, clothing and cell phones are an example of this. Also called autonomous demand, it's independent of the demand for other products. Derived demand is the demand for a product that comes from the usage of others.

Derived demand for an item occurs whenever there is a rise in demand for the items related to them. Knowledge of induced demand helps businesses develop investment strategies to utilize the market for input products. It can have profound effects on the economies of the nations involved.