Do you know the difference between autonomous demand control and derived demand? If not, you are in the right place. The demand for services and products differs in different situations. We can classify demand based on the nature of a product, usage of a product, the number of consumers and the product’s suppliers. There are different types of demand such as market-based demand and individual demand, organization and industry demand, derived and autonomous demand, demand for perishable and durable products, and long term and soft term demand. In this article, we will have a look at the differences between derived and autonomous demand.
Autonomous demand
Autonomous demand is the demand for services and products that aren’t determined or influenced by other goods. The demand for these products, therefore, arises due to biological, physical and other personal consumer needs.
Though a rare occurrence, autonomous demand arises due to the desire of an individual to consume certain types of products. For example, the demand for basic needs such as shelter, food, and clothing as well as other personal things such as vehicles is autonomous.
Derived demand
This is the demand for services and products that are influenced and determined by the nature and extent of other activities. In ongoing construction, cement and iron are examples of derived demand. Another good example is the demand for petrol or diesel on the usage of automotive. Raw materials needed in the production of a product, substitutes and complementary goods often result in derived demand.
There are various demand control systems but first, let us look at the similarities between derived demand and autonomous demand. Both derived and autonomous demand refers to the demand for services and products.
Differences between derived demand and autonomous demand
Definition
Autonomous demand is the demand for services and products that isn’t determined or influenced by other goods. Derived demand, on the other hand, refers to the demand for services or products that is influenced and determined by the nature and extent of other activities.
Demand elasticity
Derived demand has greater demand elasticity while autonomous demand has less demand elasticity.
Nature
While autonomous demand is unspecified, derived demand is specific.
Summary
Now that we have looked at the various differences and similarities between autonomous and derived demand, it is important we summarize everything for you so that you can understand it better.
Autonomous demand is the demand for services and products that isn’t determined or influenced by other goods. Some known examples of autonomous demand include basic needs such as shelter, food, and clothing and personal goods like vehicles and so on.
So before implementing autonomous demand control, it is important to bear this in mind. Derived demand is the demand for services and products that is influenced and determined by the nature and extent of other activities. Examples of derived demand include petrol or diesel demand based on the usage of raw materials, vehicles required in the production of substitutes, and complimentary goods and products.