Which of the following statements regarding market penetration as a pricing strategy is/are correct?
(1) It is useful if significant economies of scale can be achieved
(2) It is useful if demand for a product is highly elastic
Penetration pricing involves setting a low price when a product is first launched in order to obtain strong demand.
It is particularly useful if significant economies of scale can be achieved from a high volume of output and if demand is highly elastic and so would respond well to low prices.