In South America and Australia, lithium extraction is experiencing unprecedented growth. This is driven by global climate targets and the rapid transition to electric vehicles (EVs). Lithium is a crucial component in rechargeable batteries. Because of this, lithium is now a product in derived demand. As governments mandate phaseouts of internal combustion engines, consumer demand for EVs has surged. Consequently, battery manufacturers have scaled up production, leading to a massive spike in the demand for raw lithium. Global supply struggles to keep pace, leading to high price volatility and supply chain concerns.
Define the term 'derived demand' (Extract Y, line 5).
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.