Autonomous and Derived Demand

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An Autonomous demand for a product is one that arises independently of the demand for any other good whereas a derived demand is one, which is derived from demand of some other good. To look more closely at the distinction between the two kinds of demand, consider the demand for commodities, which arise directly from the biological or physical needs of the human beings, such as demand for food, clothes and shelter. The demand for these goods is autonomous demand. Autonomous demand also arises as a’ result of demonstration effect, rise in income, and increase in population and advertisement of new products. On the other hand, the demand for a good that arises because of the demand for some other good is called derived demand. For instance, demand for land, fertilizer and agricultural tools and implements are derived demand, since the demand of goods, depends on the demand of food. Similarly, demand for steel, bricks, cement etc., is a derived demand because it is derived from the demand for houses and other kind of buildings. [n general, the demand for, producer goods or industrial inputs is a derived one. Besides, demand for complementary goods (which complement the use of other goods) or for supplementary goods (which supplement or provide additional utility from the use of other goods) is a derived demand. For instance petrol is complementary goods for automobiles and a chair is a complement to a table. Consider some examples of supplement goods. Butter is supplement to bread, mattress is supplement to cot and sugar is supplement to tea. Therefore, demand for petrol, chair, and sugar would be considered as derived demand. The conceptual distinction between autonomous demand and derived demand would be useful according to the point of view of a businessman to the extent the former can serve as an indicator of the latter.

 

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67 Comments
  1. oghoroko Collins 3 years ago

    it is quite understandable.thanks.

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