What is pricing power

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What Is Pricing Power? Key Takeaways Pricing power describes the effect of a change in a firm's product price on the quantity demanded of that product. A company's pricing power is linked to price elasticity of demand for its product.

If there are plenty of competitor products, the company will have weak pricing power. If a company has a unique product, it will have strong pricing power because the customer has no alternative supplier for that product and must pay the price charged.

Fast Fact Investors consider a company's pricing power when deciding the value of a company and its shares. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear.

Investopedia does not include all offers available in the marketplace. Related Terms Learn About Elasticity Elasticity is a measure of a variable's sensitivity to a change in another variable.

Choke Price Definition Choke price is an economic term used to describe the lowest price at which the quantity demanded of a good is equal to zero. Understanding the Law of Supply and Demand The law of supply and demand explains the interaction between the supply of and demand for a resource, and the effect on its price. Monopolistic Competition Definition Monopolistic competition characterizes an industry in which many firms offer products or services that are similar, but not perfect, substitutes.

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