Because economists only call it demand to the extent that people are willing and able to make a purchase.
If someone has a need or wants something real bad but can't afford to buy the desired quantity at the prevailing price then economists don't call it demand.
Yes, the term is a bit clumsy. The way I think of it, people have desires (to drive on the highway), but are dissuaded from doing so by disincentives (it’s too busy). Adding a lane reduces the disincentive, so that latent desire is satisfied, until it reaches a new equilibrium.
But sometimes the social environment adapts and now you have to drive that amount because it got factored in and things are now built further away, so whether you want to go far is not up to you. See long commutes becoming the norm. Now, arguably long commutes lead to better job allocations and more efficient land use as people can live in one place and work in any of the workplaces within a large radius. So it's a bit more complicated than "want", but ultimately more value seems to be produced.
Is more value produced or are costs just shifted off the balance sheet onto the public commons? Driving instead of walking/public transit has certainly been profitable for some people/companies. But it has also been less than ideal from a public health standpoint. And the time spent commuting is unpaid, so while the business saves money on rent, the increase in travel time is still a cost borne by society as a whole. I would describe this as the opposite of 'efficient land use' personally.
But in the case of highways, they probably would have still gotten where they want to go by another route. The folly is treating highway capacity as being a "market" when really the decision making is much more dynamic and nuanced.
Like a market it's very complicated with many feedbacks and value judgements. For example "How much of my time is it worth sitting in traffic to get to my preferred store across town vs the closer one?"
It's a bit like queueing. The cost isn't monetary.
Ok, not maybe instead of calling it "induced", call it "latent demand" if you prefer.
People will do whatever's more convenient, so if you make driving far more convenient than everything else ("cheaper"/"more available"), they will drive.
However convenience should not be the only factor for social decisions. To take this to extremes, it would be much more convenient for J. Doe to steal a car than to buy it, so we definitely do not want to make theft convenient.
