When a firm uses premium pricing, it sets lower prices for everyday items such as toothpaste that consumers purchase frequently.

Question

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When a firm uses premium pricing, it sets higher prices for its products with the assumption that this will create a perception of higher quality, exclusivity, or luxury. This pricing strategy is typically used for products that are not purchased as frequently and may have a lower demand elasticity.

When a Firm Uses Premium Pricing, It Sets Lower Prices