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Kaeko has developed a successful business selling home security systems to homebuilders. She carefully monitors the issuance of new home permits to anticipate how many systems she will need to buy in order to supply her customers. Kaeko is concerned with derived demand.
The phrase "derived demand" in economics refers to the desire for a specific commodity or service that results from the need for unrelated, essential goods or services. For instance, a derived demand for home theater equipment like audio speakers, amplifiers, and installation services is produced by the desire for large-screen televisions.
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