The assumption that demand is elastic at a number of price points, but is inelastic between these price points leads to which approach to pricing?
A)target pricing
B)penetration pricing
C)price lining
D)skimming pricing

Question

Quizplus · Accepted Answer

This assumption is consistent with price lining, where products are priced at various levels which reflect different quality or feature levels. Customers who are highly price sensitive can choose the lower-priced options, while less price-sensitive customers can opt for the higher-priced options. This pricing strategy works well when there is price sensitivity at different points in the market, and can help attract different customer segments. Target pricing seeks to achieve a certain profit margin, penetration pricing aims to attract customers with low prices initially, and skimming pricing aims to maximize profit from early adopters before gradually reducing prices.

The Assumption That Demand Is Elastic at a Number of Price