Economics Multiple Choice Question – 30 July 2017

Price skimming is NOT likely if?

Select ONE answer:

  1. The firm has a unique product
  2. The firm has a patent for the product
  3. Demand for the good is price elastic
  4. Demand for the good is price inelastic
  5. The firm has a heavily branded good

Explain your answer?
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 3 – “Theoretically” is the key word here, because although price skimming can effectively segment the market, it’s almost impossible for the strategy to capture all of the consumer surpluses.  Price skimming is most effective when the product follows an inelastic demand curve, meaning the quantity demanded doesn’t rise or fall drastically in response to a change in prices.

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