Penetration pricing is likely to be utilized when demand for a good or service is highly inelastic.

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Penetration pricing is commonly used when a company enters a new market and wants to gain market share quickly. It involves setting low prices initially to attract customers and gain a foothold in the market. This pricing strategy is most effective when the market is highly competitive, and demand is elastic. Inelastic demand refers to a situation where changes in price have a minimal impact on the quantity of the product demanded by consumers. Therefore, penetration pricing is not suitable for goods or services with highly inelastic demand.

Penetration Pricing Is Likely to Be Utilized When Demand for a Good