Derived demand

[1] Demand for transport is another good example of derived demand, as users of transport are very often consuming the service not because they benefit from consumption directly (except in cases such as pleasure cruises), but because they wish to partake in other consumption elsewhere.

Second, competitive markets for the final good and all other factors of production are always in equilibrium.

The inverse of the relationship, y = f (x), is the graphical representation of Marshall’s derived demand curve for the selected factor of production.

A low elasticity of derived demand encourages supply restrictions.

According to him, in order for elasticity of derived demand to be low, ‘It is “important to be unimportant” only when the consumer can substitute more easily than the entrepreneur’.