Derived demand is a need for a good or service that occurs consequently due to a demand of something else. Business demand follows this pattern of derived demand because as need for products increases, business thus increases. This also works with prices.
Also, what is meant by derived demand?
Derived demand—in economics—is the demand for a good or service that results from the demand for a different, or related, good or service. It is a demand for some physical or intangible thing where a market exists for both related goods and services in question.
Subsequently, question is, what is the difference between demand and derived demand?
Demand is a quantity of a product which is required by the consumers at a price on a given period of time but derived demand is the demand created by increase in demand of a particular product for example the demand of houses create the demand of cement, iron and wood etc.
Why Shipping is a derived demand?
The demand for shipping is a derived demand as the product being consumed is not the transport itself (except in passenger transport), but the goods that are being transported. Therefore, when demand for cars increases, demand for transport increases.
What is derived demand example?
Derived demand occurs when there is a demand for a good or factor of production resulting from demand for an intermediate good or service. Example – mobile phones and lithium batteries. The rise in demand for mobile phones and other mobile devices has led to a strong rise in demand for lithium.