PED

PED

1. Measures the extent to which a change in price leads to a change in quantity demanded

2. Factors influencing PED

   • Number & closeness of substitutes
   • Luxury or necessity
   • Proportion of income spent on a good
   • income spent on a good

3. Significance of PED for a firm

   • In a highly competitive market
     • many standardised products
       • may try a USP
   • when there are few close substitutes
     • niche markets