Asked by Lyric Bolden on Jul 14, 2024
Verified
As a consumer you believe yourself to act rationally,optimally and self-interestedly.You like ice cream and value a pint at $7.Usually you buy a pint each week at $4.This week however,the price jumped to $5 a pint.What would you do?
A) buy the ice cream since the price is still below your maximum willingness to pay
B) buy the ice cream since even at the new price it gives you a positive amount of consumer surplus
C) not buy the ice-cream since the price is now higher
D) both A&B
Maximum Willingness to Pay
The highest amount a consumer is willing to spend on a good or service, reflecting the perceived value.
Consumer Surplus
The difference between what consumers are willing to pay for a good or service and what they actually pay.
Rational
Related to decision-making, denotes behavior in accordance with logic or reason, where choices are made to maximize self-interest or outcome.
- Elucidate the concept of consumer surplus and its sensitivity to price fluctuations.
Verified Answer
KS
Kamen SentaiJul 15, 2024
Final Answer :
D
Explanation :
Both options A and B are correct because the new price of $5 is still below your maximum willingness to pay of $7, indicating that purchasing the ice cream would still result in a positive consumer surplus. This means you would still derive more value from the ice cream than what you pay for it, aligning with rational, optimal, and self-interested consumer behavior.
Learning Objectives
- Elucidate the concept of consumer surplus and its sensitivity to price fluctuations.