Price skimming occurs when a new product is priced higher than that of the competition to maximize profit.

Question

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Price skimming is a pricing strategy where a new product is initially introduced in the market with a high price. This high price is used to maximize profits from early adopters who are willing to pay a premium price for the product. As demand from early adopters is satisfied, the price is gradually lowered to attract more price-sensitive consumers.

Price Skimming Occurs When a New Product Is Priced Higher