Derived Demand
By: Sharee Pinard
AP Microeconomics
Mr. Gill
What is Derived Demand?
• Demand for a basic good.
• Demand for an input to a production
process, dependent on the output of a
finished product.
• These finished products include land,
labor, and capital.
Process of Derived Demand
• The marginal revenue product of a resource is in fact the firm's
demand curve for the resource.
• If people become less willing to buy the product that the firm is
producing. This will affect the demand for resources because
this demand is derived from the demand for output.
Lemons and Lemonade...
• Economists say that the demand for an input like
labor is derived from the demand for the goods
produced by the input.
• For example, If the weather is hot and demand for
lemonade rises, a stronger demand for production
resources such as lemonade workers(labor), lemons,
and sugar(capital), is predicted.
• An increase in the demand for a resource means that
at any wage, the firm wishes to employ more of that
resource.
Direct Derived Demand Table
Direct Derived Demand
• Direct derived demand: movements that are
directly the outcome of economic activities, without
which they would not take place.
• For instance in the table prior, work-related activities
commonly involve commuting between the place of
residence and the workplace. There is a supply of
work in one location (residence) and a demand of
labor in another (workplace), transportation
(commuting) being directly derived from this
relationship. For freight transportation, all the
components of a supply chain require movements of
raw materials, parts and finished products on modes
such as trucks, rail or containerships. Thus,
transportation is directly the outcome of the functions
of production and consumption.
See 2006 AP
Microeconomics FreeResponse Question #3
Work Cited Page
• Derived Demand Definition
• Derived Demand Profit Maximizing
Graph
• Process of Derived Demand
• Lemons and Lemonade
• Direct Derived Demand