Which of the following is the most common method of market segmentation used to analyze market equilibrium?

• A. Grouping consumers by brand loyalty
• B. Segmenting the market by advertising exposure
• C. Segmenting the market by price sensitivity
• D. Dividing the market by geographic location

Answer: (C)

Verified step by step guidance

1. Understand that market segmentation involves dividing a market into distinct groups of consumers who have different preferences or behaviors.
2. Recognize that common methods of segmentation include grouping by brand loyalty, advertising exposure, geographic location, and price sensitivity.
3. Recall that in microeconomics, analyzing market equilibrium often requires understanding how consumers respond to price changes, making price sensitivity a key factor.
4. Identify that segmenting the market by price sensitivity allows firms to predict how different groups will react to price changes, which is crucial for setting prices and maximizing profits.
5. Conclude that among the options, segmenting the market by price sensitivity is the most common and useful method for analyzing market equilibrium.