Derived Demand

AAA

DEFINITION of 'Derived Demand'

A term used in economic analysis that describes the demand placed on one good or service as a result of changes in the price for some other 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. The derived demand can have a significant impact on the derived good's market price.

INVESTOPEDIA EXPLAINS 'Derived Demand'

The demand that is derived from the demand from another good can be an excellent investing strategy. Think about a "pick and axe" strategy. During the gold rush, the demand for gold prompted prospectors to search for gold. These prospectors needed picks and axes (and other supplies) to mine for gold. It is arguable that on average, those who were in the business of selling supplies to these prospectors faired better during the gold rush than the prospectors did. The demand for picks and axes was derived, to a large degree, from the demand for gold at that time.

RELATED TERMS
  1. Precious Metals

    A classification of metals that are considered to be rare and/or ...
  2. Bullion

    Gold and silver that is officially recognized as being at least ...
  3. Bre-X Minerals Ltd.

    One of the biggest mining scams and frauds perpetrated by any ...
  4. Fool's Gold

    Also known as iron pyrite, fool's gold is a gold-colored mineral ...
  5. Aggregate Demand

    The total amount of goods and services demanded in the economy ...
  6. Cape Cod Method

    A method used to calculate loss reserves that uses weights proportional ...
RELATED FAQS
  1. How does the market share of a few companies affect the Herfindahl-Hirschman Index ...

    In economics and commercial law, the Herfindahl-Hirschman Index (HHI) is a widely used measure that indicates the amount ... Read Full Answer >>
  2. How can individuals or businesses handle transaction costs for economic externalities?

    Externalities, also known as external economies, and transaction costs are two significant and evolving issues in contemporary ... Read Full Answer >>
  3. Why should management teams focus more on horizontal integration?

    Management teams should focus more on horizontal integrations because they allow for economies of scale, economies of scope, ... Read Full Answer >>
  4. How do externalities represent profit opportunities?

    Economic externalities expose market transactions where the full costs or benefits of economic activity are not being internalized ... Read Full Answer >>
  5. What components are factored in determining net sales?

    The key components that factor into determining net sales include revenue, sales returns, allowances and discounts. Essentially, ... Read Full Answer >>
  6. What does the rule of 70 indicate about a country's future economic growth?

    The rule of 70 could be used to indicate the approximate number of years that it would take a company's economic growth to ... Read Full Answer >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Economics

    What Is Wrong With Gold?

    Despite its historic and symbolic appeal, this metal is simply a commodity. Here we explore its meaning as an investment.
  3. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  4. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
  5. Economics

    What is Deadweight Loss?

    Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  6. Economics

    How to Do a Cost-Benefit Analysis

    The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted.
  7. Economics

    Gaining Market Influence-- The Case of US Shale

    A convergence of sustained bank financing, falling production costs and rising oil prices might position the US shale industry for a greater market role.
  8. Economics

    The Big Chill: What’s Wrong With The U.S. Consumer

    Based on the most recent April data, investors may, once again, be disappointed when the second-quarter gross domestic product (GDP) report comes in.
  9. Fundamental Analysis

    Calculating the Herfindahl-Hirschman Index (HHI)

    The Herfindhal-Hirschman Index, (HHI) is a measure of market concentration and competition among market participants.
  10. Economics

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center