When are consumers likely to experience consumer surplus when purchasing goods through an electronic retailing channel?

• A. When the product is unavailable through traditional retail channels
• B. When the price they pay is equal to their willingness to pay for the product
• C. When the price they pay is less than their willingness to pay for the product
• D. When the price they pay is greater than their willingness to pay for the product

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of consumer surplus. Consumer surplus occurs when a consumer pays a price for a good that is less than the maximum amount they are willing to pay for that good.
2. Step 2: Define willingness to pay (WTP) as the highest price a consumer is ready to pay for a product based on the utility or satisfaction they expect to receive.
3. Step 3: Recognize that consumer surplus is calculated as the difference between the willingness to pay and the actual price paid, expressed as \(\text{Consumer Surplus} = \text{WTP} - \text{Price}\).
4. Step 4: Analyze the options: if the price equals the willingness to pay, consumer surplus is zero; if the price is greater than willingness to pay, the consumer would not purchase the product; if the price is less than willingness to pay, consumer surplus is positive.
5. Step 5: Conclude that consumers experience consumer surplus when the price they pay is less than their willingness to pay for the product, which means they gain extra benefit or utility from the purchase.