Final answer:
A low-price strategy is successful when demand is inelastic because consumers are likely to continue purchasing similar quantities even when prices decrease. In such a market, businesses can lower prices without significantly affecting their profit margins, often securing a larger market share.
Step-by-step explanation:
The only time a low-price strategy is successful is when demand is inelastic. This scenario is represented by option (d) When Demand is Inelastic. When demand for a product is inelastic, consumers do not significantly change the quantity they purchase in response to price changes. As a result, cost-saving measures which lead to lower prices can result in substantial consumer benefits. A low-price strategy can be particularly effective in such markets because consumers are still likely to buy the same quantity even at lower prices, thus businesses can gain a larger market share without sacrificing too much on profit margins.
For example, in markets where an entity like a well-respected brand name has been developed over time or where there is an industry with economies of scale, a reputation for cutting prices may deter new entrants and consolidate the position of established firms. Additionally, if the quantity demanded is high relative to the lowest point on the long-run average cost curve, the market will be competitive, further emphasizing the benefit of a low-price strategy to gain an edge over competitors.