Derived demand is defined as the term 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 solely related to the demand place on a certain good or service in order to produce or acquire another good or service.
For example, the demand for raw materials is depended on the demand of the finished product.
The derived demand depends on:
1) marginal productivity of the resource (ex. raw materials)
2) price of the product that the resource produces (ex. finished products)
These two are related through the marginal revenue product concept.
