Tuesday, November 10, 2009

What is Derived Demand

Requirement for one product which is created due to purchase of another product.Derived demand occur for consumers who purchase goods for further production, because their purchase is based on demand for their final product.
For example: When the demand for automobile is high the demand for steel and all other products used to make automobile is also high. Should the demand for automobile drop so will the demand for the product used to make the automobile.