Derived demand

Derived demand is the demand for a good or service that is derived from the demand for another good or service. In the context of logistics, derived demand refers to the demand for transportation services that are derived from the demand for the goods that need to be transported.

• Derived demand for transportation exists because there is a need to move goods from one location to another in order to meet customer demand.
• For example, if a company needs to transport its products from its manufacturing facility to its retail outlets, then the company will have a derived demand for transportation services.
• The company will need to find a transportation provider that can help them move their products from point A to point B.

Derived demand can fluctuate based on changes in customer demand or changes in the supply of transportation services:

• If customer demand for a product increases, then the derived demand for transportation will also increase. This is because the company will need to transport more products to meet the increased demand.
• Conversely, if customer demand for a product decreases, then the derived demand for transportation will also decrease. This is because the company will need to transport fewer products to meet the decreased demand.

Changes in the supply of transportation services can also impact derived demand. If there is a shortage of transportation services, then companies will need to pay higher prices for shipping services. This will cause the derived demand for transportation to increase. Conversely, if there is an oversupply of transportation services, then companies will need to pay lower prices.

Related Links

What is transport demand? – Transport Futures Institute
Transportation as a Derived Demand – The Geography of Transport Systems
Derived demand
Derived Demand Definition
What is a Derived Demand?
Derived Demand – Economics Help; Derived Demand – Economics Help
What is derived demand and what implications does it have for logistics systems

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