For the following two statements of Assertion (A) and Reasoning (R) indicate the correct code : Assertion (A) : Low initial pricing for new products is regarded as the principal instrument for entering into mass markets. Reasoning (R) : Firms generally go for production of new products with excess capacity initially. Codes :
Analysis of Assertion (A)
Assertion (A) states that low initial pricing for new products is a primary tool for entering mass markets. This strategy, known as penetration pricing, is indeed widely used. Its goal is to attract a large volume of customers quickly, gain significant market share, and establish a strong market presence, making it a principal instrument for mass market entry.
Therefore, Assertion (A) is correct.
Analysis of Reasoning (R)
Reasoning (R) suggests that firms often produce new products with excess capacity initially. This allows them to scale production efficiently if demand surges, minimizes the risk of stockouts, and can help keep per-unit production costs lower, especially when implementing a low-price strategy.
Therefore, Reasoning (R) is correct.
Relationship Between Assertion (A) and Reasoning (R)
While producing with excess capacity (R) can support a low-price strategy (A) by managing costs and ensuring supply for high volume, it does not fully explain *why* low pricing itself is the principal instrument for mass market entry. The decision to use low initial pricing is driven primarily by market penetration goals, customer acquisition, and competitive dynamics, rather than solely by the availability of excess capacity. Excess capacity is a supporting operational factor, not the fundamental strategic reason.
Thus, both statements are correct, but (R) does not offer the complete explanation for (A).
Conclusion
Based on the analysis:
- Assertion (A) is correct.
- Reasoning (R) is correct.
- Reasoning (R) does not fully explain Assertion (A).
This corresponds to Code 1.
Important Questions from Pricing Strategies
Cost plus pricing is considered appropriate for which combination of the following?
(i) Product Tailoring
(ii) Public Utility Pricing
(iii) Refusal Pricing
(iv) Monopoly Pricing
Choose the correct answer from the code given below:
A firm that produces highly substitute goods can adopt which one of the following pricing strategies ?
In penetration pricing a business firm seeks to access deeper market penetration by keeping prices ____________
Which type of retailers involve in comparatively low prices as a major selling point combined with the reduced costs of doing business?
A reduction from the list price that is offered by a seller to buyers in payment for marketing functions the buyers will perform is known as :
