answer following the mark scheme

1 (a) Define the term 'price skimming'. [2] (b) Briefly explain why a business might use a price skimming strategy. [3] 1(a) Dene the term 'competitive pricing strategy'. A pricing strategy.l method of pricing where a price for a product or service is seti made (1) Based upon the price set by competitors (1 ). A business offers to match the price of competitors (1 ). Set a price slightly below competitors (1 ). An example Mcdonalds v Burger King (1 ). Sound denition 2 of the factors listed above (2 marks) Partial definition 1 of the factors listed above (1 mark) No creditable content. (0 marks) 1(b) Briey explain why a business might use a price skimming strategy. Answers couid include: - Price skimming is the setting of a high price for a product that is considered to be unique or having special features and thus has a low price elasticity of demand (inelastic). May be a new product aim is to maximise short-term profits before competitors enter the market. Create customer perception of high quality. Customers can equate quality with high price. Producers of luxury goodsidesigner goods focus on status conscious customers who will pay high prices. Recoup high costs involved in production (e.g. pharmaceutical companies). To maximise prot. To exploit a product with a low elasticity of demand. Sound explanation of the advantages of a business using a price skimming strategy. (3 marks) Partial I limited explanation of the advantages of a business using a price skimming strategy. (2 marks) Explanation 1' reference to a price skimming strategy. (1 mark) No creditable content (0 marks)