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Derived Demand and Composite Demand

AS, A Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

This video looks at the difference between derived demand and composite demand in markets

Derived demand

  • Derived demand is the demand for a factor of production used to produce another good or service
  • Steel: The demand for steel is strongly linked to the market demand for cars and the construction of new buildings
  • Wood: Wood is a product where much of the demand comes from the uses to which it can be put such as furniture & fencing

Composite demand

Composite demand is where goods have more than one use

  1. An increase in the demand for one product leads to a fall in supply of the other
  2. An example is milk which can be used for cheese, yoghurts, cream, butter and other products including fertilizer
  3. Another example is land – e.g. farmland can be developed in many different ways, urban land has different uses
  4. Oil is used in many different industries such as plastics

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