CD manufactures and sells a number of products. All of its products have a life cycle of less than one year. CD uses a four stage life cycle model (Introduction, Growth, Maturity and Decline).
CD has recently developed an innovative product. It was decided that it would be appropriate to adopt a market skimming pricing policy for the launch of the product. However CD expects that other companies will try to join the market very soon. This product is currently in the Introduction stage of its life cycle and is generating significant unit profits. However, there are concerns that these current unit profits will not continue during the other stages of the product's life cycle.
Required:
Explain, with reasons, the changes, if any, to the unit selling price AND the unit production cost that could occur when the product moves from the previous stage into each of the following stages of its life cycle:
(i) Growth
(ii) Maturity