Define the term 'price skimming'.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [1] Price skimming is a pricing strategy which involves setting a relatively high price for a product or service
2. [1] The price is then lowered (over time)
3. [1] It is a new product or a differentiated product
4. [1] The product has a low price elasticity of demand
5. [1] In order to seek a high level of profit/sales/demand
6. [1] To recover any investment (such as R&D)
7. [1] To exploit the distinctive attributes of a new product in the market
8. [1] To create consumer perception of high quality
9. [1] To maximise short term profits on such a differentiated product/service
10. [1] To recover any investment (such as R&D)
11. [1] To exploit an inelastic demand for a product/a monopoly position