Which of the following is the second step in the consumer decision process related to consumer surplus and willingness to pay?

• A. Comparing the market price to the consumer's willingness to pay
• B. Calculating the consumer surplus
• C. Making the purchase decision
• D. Determining the maximum price the consumer is willing to pay

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the consumer decision process in the context of consumer surplus and willingness to pay. The process typically starts with the consumer determining their maximum willingness to pay for a good or service.
2. Step 2: Identify that after determining the maximum willingness to pay, the consumer compares this maximum price to the actual market price. This comparison helps the consumer decide whether the purchase is beneficial.
3. Step 3: Recognize that if the market price is less than or equal to the willingness to pay, the consumer proceeds to make the purchase decision.
4. Step 4: Once the purchase decision is made, the consumer surplus can be calculated as the difference between the willingness to pay and the market price, expressed as \(\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Market Price}\).
5. Step 5: Summarize the sequence: first, determine willingness to pay; second, compare willingness to pay with market price; third, make the purchase decision; and finally, calculate consumer surplus.