independent demand

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The situation in which the demand for a product is independent of the production process, i.e. it is subject to market forces and therefore demand has to be forecast. When a car manufacturer produces a car, the number of wheels required is known before each unit can be sent out of the factory. However, the manufacturer does not know how many transmissions will fail, or whether individuals will buy their replacements from other suppliers. They cannot therefore predict accurately how many spares to produce. Compare dependent demand.

Subjects: Business and Management.

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