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Summary - PED - Price Elasticity of Demand

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2023/2024 Written for academic year
Institution AQA
Module 3.2 Managers, leadership and decision making
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The document discusses Price Elasticity of Demand (PED) and its relevance to marketing. PED measures how changes in price affect demand, which is crucial for sales revenue. It highlights the inverse relationship between price and demand: increasing prices decrease demand, while decreasing prices increase demand. PED is always negative, reflecting this inverse relationship. Additionally, the document differentiates between elastic (demand changes significantly with price changes) and inelastic (demand changes little with price changes) products. The importance of PED in marketing decisions, particularly in setting prices and achieving marketing objectives, is emphasized.

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PED - Price Elasticity of Demand

Why is marketing related to PED?


- Demand is part of the Profit Formula – QTY

- Price comes into marketing objectives

- Marketing takes decisions on price


What is PED and what do you need to find out?


When you change the price of a product or a service what is the impact on demand?

You need to know this because it will affect your sales revenue (the money coming in)


General concept


- If the price is INCREASED – Demand will always go DOWN
- If the price is DECREASED – Demand will always go UP
- = Inverse relationship



Elastic – Moves a lot

Inelastic – Doesn’t move a lot



PED will always be a minus number – because when one goes up the other one goes down




Formula:

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Study Level
A/AS Level
Subject
Business Subjects
Uploaded on
July 5, 2024
Number of pages
1
Written in
2023/2024
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Summary
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