Multiple Choice
A skimming pricing strategy is most likely to succeed under which of the following conditions?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
Multiple Choice
If a consumer only purchases a product after its price is discounted, this might indicate that:
A
the consumer would have purchased the product at any price
B
the discounted price was higher than the consumer's willingness to pay
C
the original price exceeded the consumer's willingness to pay
D
the consumer's surplus was maximized at the original price
Verified step by step guidance1
Understand the concept of willingness to pay (WTP), which is the maximum price a consumer is willing to pay for a product.
Recognize that if a consumer only buys a product after a price discount, it means the original price was above their WTP, so they chose not to buy at the higher price.
Recall that consumer surplus is the difference between the consumer's willingness to pay and the price they actually pay.
Since the consumer did not purchase at the original price, the original price must have exceeded their willingness to pay, preventing the transaction.
Therefore, the fact that the consumer only buys after a discount indicates the original price was too high relative to their willingness to pay.
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