1.

Explain the following Product Launch Pricing Strategies with examples:

a. Price Skimming
b. Market Penetration Pricing

Ans. Price skimming is a pricing strategy that involves setting a high price before other competitors
come into the market. ... For example, the PlayStation 3 was originally sold at $599 in the US market, but
it has been gradually reduced to below $200.

Price skimming is often used when a new type of product enters the market. The goal is to
gather as much revenue as possible while consumer demand is high and competition has not
entered the market.

Market penetration pricing relies on the strategy of using low prices initially to make a wide number of
customers aware of a new product. ... Penetration pricing examples include an online news website
offering one month free for a subscription-based service or a bank offering a free checking account for
six months.

For example, if there are 300 million people in a country and 65 million of them own cell phones, the
market penetration of cell phones would be approximately 22%. In theory, there are still 235 million
more potential customers for cell phones, or 78% of the population remains untapped.

2. What is Price Elasticity? Explain with a quantitative numerical example.

When Price Elasticity is low and when is Price Elasticity high? Explain with examples.

Price Elasticity is a measure of the relationship between a change in the quantity demanded of a
particular good and a change in its price. Price Elasticity of Demand (PED) is a term used in economics
when discussing price sensitivity.