What is meant by derived demand?

Derived demand refers to the concept in economics where the demand for a good or service is contingent upon the demand for another product or service. This relationship is particularly evident in the context of production; for instance, if more cars are being produced, the demand for steel, rubber, and labor needed to manufacture those cars will also increase. Thus, derived demand is not for the goods or services themselves, but rather for the resources or inputs that go into their production, making it reliant on the economic activity surrounding them.

The other options highlight aspects of demand that do not accurately capture the essence of derived demand. Direct demand pertains to demand for a product without considering its production chain, services in the tertiary sector focus narrowly on one part of the economy without showing the interconnectedness of demand, and demand that has no connection to production needs misrepresents the fundamental nature of derived demand, which is inherently linked to production processes.