Difference between Autonomous Demand and Derived Demand

Demand for products and services shifts in response to changes in supply and price. Demand may be segmented in a variety of ways, including product usage, product kind, customer count, and supplier count. Individual and market−based demand, demand from industry and organizations, independent and derived demand, need for both durable and perishable commodities, and short−term and long−term demand are just some of the ways that demand can be segmented. In this article, we will analyze the variations between autonomous demand and derived demand.

What is Autonomous Demand?

The term "Autonomous demand" is used to describe the desire for a product or service that is not impacted by the demand for similar products. Demand for these products is driven, in part, by consumers' physiological, biochemical, and other unique needs.

It happens when people suddenly feel compelled to buy a specific item, even though such impulses are rather rare. For instance, supply and demand is the only thing that determines the demand for food, housing, clothing, and other personal goods like vehicles.

What is Derived Demand?

What this means is that the scale and kind of activity elsewhere determine and influence the demand for products and services. Iron and cement, for instance, may be seeing derived demand in the current construction sector.

The need for fossil fuels like gasoline and diesel, brought on by the proliferation of cars, is another example of this phenomenon. In addition, the usage of supplementary products, substitutes, and raw materials that are integral to the production of a product sometimes leads to derived demand.

Differences: Autonomous Demand and Derived Demand

The following table highlights the major differences between Autonomous Demand and Derived Damand −

Conclusion

"Autonomous demand" refers to the demand for a product or service that is not affected by or dependent on the demand for any other product or service. Autonomous demand includes the basics like food, housing, and clothing and more specialized goods like vehicles.

When we talk about "derived demand," however, we're talking about the desire for products and services that is determined and affected by the scale and character of other activities. "Induced demand" describes this kind of consumer desire. The need for diesel or gasoline because of automobile use is an example of derived demand, as are the requirements for a product's raw materials and the demand for the product's complementary and replacement goods.