Summary:

WHAT IS LATENT DEMAND AND THE P.I.E.?The concept of latent demand is
rather subtle. The term latent typically refers to something that is
dormant, not observable, or not yet realized. Demand is the notion of
an economic quantity that a target population or market requires
under different assumptions of price, quality, and distribution,
among other factors. Latent demand, therefore, is commonly defined by
economists as the industry earnings of a market when that market
becomes accessible and attractive to serve by competing firms. It is
a measure, therefore, of potential industry earnings (P.I.E.) or
total revenues (not profit) if a market is served in an efficient
manner. It is typically expressed as the total revenues potentially
extracted by firms. The “market” is defined at a given level in the
value chain. There can be latent demand at the retail level, at the
wholesale level, the manufacturing level, and the raw materials level
(the P.I.E. of higher levels of the value chain being always smaller
than the P.I.E. of levels at lower levels of the same value chain,
assuming all levels maintain minimum profitability).The latent demand
for finished cotton plain weave broadwoven fabric finished in
finishing mills excluding pile is not actual or historic sales. Nor
is latent demand future sales. In fact, latent demand can be lower
either lower or higher than actual sales if a market is inefficient
(i.e., not representative of relatively competitive levels).
Inefficiencies arise from a number of factors, including the lack of
international openness, cultural barriers to consumption,
regulations, and cartel-like behavior on the part of firms. In
general, however, latent demand is typically larger than actual sales
in a country market.For reasons discussed later, this report does not
consider the notion of “unit quantities”, only total latent revenues
(i.e., a calculation of price times quantity is never made, though
one

Book Details:

Physical Description: 200 pages
Edition Info: Spiral-bound; 2005-04-05

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