Dubbed "derived demand," this concept describes the connection between consumer and business-to-business product demand.
What Is Derived Demand?
- In economics, derived demand is the demand for a good or service that arises from the demand for a complementary or dissimilar good or service. There must be a market for the specific tangible or intangible good or service in order for there to be a demand for it. On the market price of the derived product, derived demand can have a significant effect.
- Derived demand refers to the demand for a good or service that arises simply from the need for it to be able to purchase or create another good or service. The amount of resources—including money, land, labor, and raw materials—necessary to produce a specific good might influence derived demand. In these situations, the demand for raw materials is closely related to the demand for the goods that need the raw materials to be produced.
- When used to foresee the potential market for goods other than the original product desired, the demand that is derived from the demand for another product can be a great investing strategy. Furthermore, any sector that contributed to the success of the first sector will benefit if activity in that sector increases.
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