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 in...
3.2 Managers, leadership and decision making
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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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