What Are Price Controls? The term “price controls” refers to the legal minimum or maximum prices set for specified goods. Price controls are normally mandated by the government in the free market. They are usually implemented as a means of direct economic intervention to manage the affordability of certain goods and services, including rent, gasoline
What Is Price Discovery? Price discovery is the overall process, whether explicit or inferred, of setting the spot price or the proper price of an asset, security, commodity, or currency. The process of price discovery looks at a number of tangible and intangible factors, including supply and demand, investor risk attitudes, and the overall economic and geopolitical
What Is the Price-to-Earnings (P/E) Ratio? The price-to-earnings ratio is the ratio for valuing a company that measures its current share price relative to its earnings per share (EPS). The price-to-earnings ratio is also sometimes known as the price multiple or the earnings multiple. P/E ratios are used by investors and analysts to determine the relative value of a
DEFINITION of Price-Earnings Relative Price-earnings relative refers to the price-earnings ratio of a stock divided by the price-earnings ratio of a broader market measure. The price-earnings ratio, often written as P/E, is equal to a stock’s or broad market’s market price divided by a measure of the stock’s or market’s earnings. There are many methods
What Is Price Elasticity of Demand? Price elasticity of demand is a measurement of the change in the consumption of a product in relation to a change in its price. Expressed mathematically, it is: Price Elasticity of Demand = Percentage Change in Quantity Demanded ÷ Percentage Change in Price Economists use price elasticity to understand
What Is Price Improvement? Price improvement involves achieving a trade at a better price than the price quoted at the time an order was placed. It would mean finding a higher bid price if you are selling an asset, or a lower ask price if you are buying an asset. While many brokers tout their
What Is Price Leadership? Price leadership occurs when a leading firm in a given industry is able to exert enough influence in the sector that it can effectively determine the price of goods or services for the entire market. This type of firm is sometimes referred to as the price leader. This phenomenon is common
What Is a Price Level Adjusted Mortgage (PLAM)? A price level adjusted mortgage (PLAM) is a graduated-payment home loan. The principal adjusts for inflation. Under this unique type of mortgage, the bank or lender will not change the interest rate but will revise the homebuyer’s outstanding principal based on a broader inflation rate that is derived
What Is a Price Multiple? A price multiple is any ratio that uses the share price of a company in conjunction with some specific per-share financial metric for a snapshot on valuation. The share price is typically divided by a chosen per-share metric to form a ratio. Price multiples enable investors to evaluate the market
What Is Price per Flowing Barrel? In finance, “price per flowing barrel” is a metric used to estimate the value of a company that produces oil and gas. This calculation is performed by dividing the company’s enterprise value (EV) by the number of barrels it produces in a typical day. Enterprise value measures a company’s
