Business Studies Multiple Choice Question – 20 October 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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 using diagrams:
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This is multiple choice question is suitable for Business Studies KS5 classes.

The answer is 3 – Price skimming is a pricing strategy in which a business sets a relatively high initial price for a product or service at first, then lowers the price over time. It is effective only when the firm is facing an inelastic demand curve. If the long run demand schedule is elastic, market equilibrium will be achieved by quantity changes rather than price changes. Penetration pricing is a more suitable strategy in this case.

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