Derived Demand By: Sharee Pinard AP Microeconomics Mr. Gill

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 Gr aph Process of Derived Demand Lemons and Lemonade Direct Derived Demand