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Derived demand is the market demand for a specific manufacturing element or intermediate good as a result of a requirement for another intermediate or final product. The quantity of a product that an economy is willing and able to consume in a certain time frame is known as demand. Derived demand is defined as demand that is based on the need for a different product.

The demand for labor is derived from the demand for the good whose manufacture necessitates the use of labor. As a result, it's a derived demand. The amount of good produced by a firm is determined by the price of the good, hence defining the demand for human or physical capital. As a result, physical capital demand is likewise a derived demand. Examples. Employees are in high demand among producers. Another example is that demand for steel leads to the derived need for steelworkers because steelworkers are required for steel production. Steel's price rises in tandem with its demand.