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What is the most likely reason that a business would use price skimming? (A) To encourage export sales (B) To achieve market share quickly (C) To gain high profits when demand is strong (D) To reverse the decline stage of the product life cycle - HSC - SSCE Business Studies - Question 9 - 2013 - Paper 1
Question 9
What is the most likely reason that a business would use price skimming? (A) To encourage export sales (B) To achieve market share quickly (C) To gain high prof... show full transcript
Worked Solution & Example Answer:What is the most likely reason that a business would use price skimming? (A) To encourage export sales (B) To achieve market share quickly (C) To gain high profits when demand is strong (D) To reverse the decline stage of the product life cycle - HSC - SSCE Business Studies - Question 9 - 2013 - Paper 1
Step 1
To gain high profits when demand is strong
Answer
Price skimming is a pricing strategy where a business sets a high price for a new product to maximize profits from segments willing to pay the premium. This approach is typically utilized when demand is strong, allowing the company to capture the maximum amount of revenue before competitors enter the market and before the price is reduced.
Thus, the most likely reason a business would use price skimming is to gain high profits when demand is strong. This option aligns with the objectives of price skimming.