What is a derived demand in business?
derived demand is the demand for goods and services that are generated as a result of demand for other goods and services. This particular type of demand applies to both manufacturers and consumers, as demand for one good or service may be related to the process necessary to create another goods or services. The phenomenon of derived demand can sometimes lead to an increase in the price of a marginal income product, as the demand for sources needed to produce a physical product is also increasing.
In the derived demand situation, almost any kind of goods and services can be involved. Demand for the auxiliary goods that work with the product sometimes increases as the appropriateness of this product increases. For example, if the product is a male suit, many other goods may also be desirable for the same customer. This would include new shoes, belt, shirt for dresses and tie and other accessories.
The same general principle can be used on demand for transport. To make consumers DODAL It is often necessary to send these goods to the area from distant places. From this point of view, the demand for orange in Florida in Minnesota would create a derived demand for reliable freight services to transport these oranges from Florida to Minnesota.
Some businesses are structured to use the reality of derived demand and create product lines where all items produced have a certain relationship to each other. For example, the company can produce hot dogs as the main product, but also produce buns, cucumbers and mustard and ketchup as secondary products. This not only makes it possible to fulfill consumer demand for rolls, but also satisfy a derivative demand for goods that are often consumed along with hot dogs.
demand for any good or service creates derived demand for other products. It is possible almost whatEven the type of combination, including demand for a given service, which in turn creates demand for specific goods. Teleconference services are common in many organizations, which in turn trigger demand for goods such as speakers. Daters provide consumers with a service, but they have demand for meals and various types of equipment that are the key to providing this service. For businesses that can identify the demand for different products that are caused by a desire for one particular product, the volume of business will significantly increase and earn a healthy return.