Microeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859484
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Chapter 5, Problem 1E
To determine
To explain:
The reason for high
Expert Solution & Answer
Explanation of Solution
The reason for high price when product is introduced first in a market is shown graphically as below:
The price for big-screen televisions was high initially because whenever a new product launched in the market, the producer enjoys the benefit of least competition. A firm or producer charges a high price in order to skim the highest revenue and it lowers the price stepwise in order to generate maximum profit. The above diagram shows that the firm charges P1 price for newly introduced big screen television (Q1) and later it decreases the follow-up price by P2 and quantity Q2 in order to maximize its revenue.
Economics Concept Introduction
Price Skimming:
Price skimming is the temporary version of
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Chapter 5 Solutions
Microeconomics (MindTap Course List)
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