Multiple Choice
How does comparison shopping help you become a smart consumer in terms of consumer surplus and 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 term describes the practice of lowering the price of an item to encourage more consumers to purchase it?
A
Marginal utility
B
Willingness to pay
C
Price discounting
D
Consumer surplus
Verified step by step guidance1
Understand the concept of price discounting: it refers to the practice of reducing the price of a product or service to stimulate higher consumer demand.
Recall that marginal utility measures the additional satisfaction a consumer gains from consuming one more unit of a good, which is different from pricing strategies.
Recognize that willingness to pay is the maximum amount a consumer is ready to pay for a good, not the act of lowering prices.
Identify consumer surplus as the difference between what consumers are willing to pay and what they actually pay, which is a result of pricing but not the practice of lowering prices itself.
Conclude that the term describing the practice of lowering the price to encourage more purchases is 'Price discounting'.
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