The demand that is derived from the demand for another product can be an excellent investing strategy when used to anticipate the potential market for goods outside of the original product desired.
The principles of derived demand work in both directions. If the demand for a product decreases, then the demand for the goods required to produce that product will also decrease.
We also could see derived demand for the internal components of computers, like motherboards and video cards, and the materials required to produce them. Derived demand is an economic term that refers to the demand for a good or service that results from the demand for a different, or related, good or service.
The demand that is derived from the demand for another good can be an excellent investing strategy when used to anticipate the desire for goods outside of the specific good desired. If activity in one sector increases, any sector responsible for the first sector’s success may also see gains.