How has the rise of the digital economy affected consumer expectations regarding willingness to pay and consumer surplus?

• A. Consumers are less concerned with price and more focused on physical store experiences, reducing their consumer surplus.
• B. Consumer expectations have remained unchanged, with no impact on willingness to pay or consumer surplus.
• C. Consumers now expect greater price transparency and more personalized offers, increasing their consumer surplus.
• D. The digital economy has led consumers to accept higher prices due to limited information, decreasing their consumer surplus.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of consumer surplus, which is the difference between what consumers are willing to pay for a good or service and what they actually pay. It measures the net benefit to consumers from market transactions.
2. Step 2: Recognize that the rise of the digital economy has increased access to information, making prices more transparent and allowing consumers to compare prices easily across different sellers.
3. Step 3: Analyze how increased price transparency and availability of personalized offers affect consumer willingness to pay. With better information, consumers can find better deals and offers tailored to their preferences, which can increase their consumer surplus.
4. Step 4: Consider the impact on consumer expectations: consumers now expect more personalized pricing and greater transparency, which shifts their willingness to pay and can enhance their overall satisfaction and surplus.
5. Step 5: Conclude that the digital economy generally increases consumer surplus by empowering consumers with information and personalized options, rather than reducing it or leaving it unchanged.