Multiple Choice
Which of the following best describes consumer surplus in relation to a buyer's willingness to pay?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
Multiple Choice
Which of the following groups responds to the incentive of a lower price in a market?
A
Buyers whose willingness to pay exceeds the original price
B
Buyers who were previously unwilling to purchase at the higher price
C
Government regulators setting price floors
D
Sellers who already supply the good at the original price
Verified step by step guidance1
Step 1: Understand the concept of incentives in microeconomics. A lower price acts as an incentive primarily by making a good or service more attractive to potential buyers who were previously unwilling or unable to purchase at a higher price.
Step 2: Identify the groups listed and analyze their likely response to a lower price. Buyers whose willingness to pay exceeds the original price are already willing to buy, so a lower price does not change their behavior significantly.
Step 3: Consider buyers who were previously unwilling to purchase at the higher price. A lower price reduces the cost to them, potentially making the purchase worthwhile, so they respond positively to this incentive.
Step 4: Evaluate government regulators setting price floors. Price floors are minimum prices set above equilibrium and do not respond to lower prices; they are policy actions, not market participants reacting to price changes.
Step 5: Analyze sellers who already supply the good at the original price. Sellers may not respond to a lower price by increasing supply because lower prices reduce their incentive to sell more, so they are less likely to respond positively to a price decrease.
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