When the demand for new homes falls, so does the demand for construction workers who build houses. This relationship exemplifies the idea of derived demand.
Three categories of derived demand exist: labor, raw resources, and processed materials. The path of derived demand refers to these elements.
Raw materials are necessary components utilized in the creation of a finished good. Crude oil and lumber are two examples of raw materials used in the construction of new dwellings and products based on petroleum.
Processed Materials: The above mentioned smartphone case is an illustration of a derived requirement for processed materials.
Labor: On a larger macro - economic level, the demand for human workers is generated by virtually every industry that requires labor to produce the good or service it intends to sell to a market. There wouldn't be a need for workers if there wasn't a market for goods and services to create them.
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