Which of the following best describes the sequence of steps consumers follow to make a purchase, considering consumer surplus and willingness to pay?

• A. Always purchase the product regardless of price or willingness to pay.
• B. Identify their willingness to pay, compare it to the market price, and purchase if the price is less than or equal to their willingness to pay.
• C. Wait for the price to increase before deciding whether to buy.
• D. Purchase the product first, then determine their willingness to pay based on satisfaction.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of willingness to pay (WTP), which is the maximum amount a consumer is ready to pay for a good or service based on the value they expect to receive.
2. Step 2: Recognize that consumers compare their willingness to pay to the market price of the product to decide whether a purchase is beneficial.
3. Step 3: If the market price is less than or equal to the consumer's willingness to pay, the consumer will proceed to purchase the product because it provides positive consumer surplus.
4. Step 4: Consumer surplus is the difference between the willingness to pay and the actual price paid, representing the net benefit or satisfaction gained from the purchase.
5. Step 5: If the market price exceeds the willingness to pay, the consumer will not purchase the product, as it would result in negative consumer surplus or a loss in value.