Consumer Surplus and Willingness to Pay quiz #10 Flashcards
Consumer Surplus and Willingness to Pay quiz #10
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Generally, people buy one product or service instead of another because they Perceive greater value or utility from it. Satisfying consumer needs is accomplished by what? Providing goods and services that deliver value. How does a new good or service create value? By satisfying unmet needs or providing greater utility. Regardless of superior quality, consumers will not pay premium prices. True or false? False; some consumers are willing to pay more for higher quality. When consumers calculate the value of a product, they do what? Compare perceived benefits to the price. To determine the value of a good in the eyes of consumers, a firm can do what? Assess willingness to pay and perceived benefits. Consumers calculate the value of a product by: Subtracting the price from the perceived benefit. The overall sacrifice a consumer makes to acquire a product or service is known as what? Total cost. Bundling of products and services that are consumed in tandem to create value is an example of what? Creating consumer surplus through complementary goods. The attractiveness of a product relative to its cost is known as what? Value. What percentage of your gross salary does the consumer typically spend on housing? About 30% (varies by location and income). If consumers' perceptions of a good improve, what happens? Demand increases, potentially raising price and consumer surplus. An example of complementary goods would be what? Hot dogs and hot dog buns. The first step in the consumer decision-making process is to do what? Recognize a need or want. Mia wants to buy a book. The economic perspective suggests that Mia will buy the book if Her willingness to pay is greater than or equal to the price. Refer to figure 7-2. At the equilibrium price, consumer surplus is what? The area below the demand curve and above the equilibrium price. Consumer surplus is shown graphically as the area Below the demand curve and above the market price. Retailers provide value to product manufacturers by doing what? Making products accessible to consumers and increasing sales. At the equilibrium quantity marginal benefit is what? Equal to marginal cost. Buyers are powerful when what? They have many alternatives and can influence prices. The term used for the relative proportion in which a company's products are sold is blank______. Sales mix. Customers are encouraged to buy a larger number of a single product when a firm offers what? Bulk discounts or lower unit prices. The expected return of a stock, based on the likelihood of various economic outcomes, equals the: Weighted average of possible returns. A decrease in the demand for recreational fishing boats might be caused by an increase in the what? Price of complementary goods, such as boat fuel. The income effect is the effect that a change in the: Price of a good has on consumer purchasing power. A theme park offers a group rate discount. What is the likely effect? Increased consumer surplus for groups. A customer picks a product over a similar product due to the__________blank of the product. Perceived value or benefit. An increase in expected future income will have what effect? Increase current consumption spending. The difference between the actual demand and the forecast is referred to as what? Forecast error. How to calculate consumer surplus from a table? Sum the differences between each buyer's willingness to pay and the market price for all buyers who purchase. Surplus can be thought of as the wealth that trade creates for consumers in a market. True or false? True. Consumer surplus after the tax is imposed is what? The area below the demand curve and above the new, higher price after tax. Sales mix refers to the combination of products sold by a company. True or false? True.
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