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Which of the following statements is correct about the concept of willingness to pay: A
Which of the following statements is correct about the concept of willingness to pay:
A. The willingness to pay is the lowest price that a buyer is willing to pay for an extra unit of a commodity.
B. The willingness to pay for a commodity increases exponentially as the consumption of the commodity increases.
C. The willingness to pay for a commodity increases linearly as the consumption of the commodity increases.
D. If a consumer is consuming 10 units of a commodity and he is ready to pay $2 for the eleventh unit, his willingness to pay for the eleventh unit is $2.
Expert Solution
Option D. If a consumer is consuming 10 units of a commodity and he is ready to pay $2 for the eleventh unit, his willingness to pay for the eleventh unit is $2 is correct
This option is correct because the willingness to pay means the price at which a buyer is willing to buy the commodity. It is the difference between consumer surplus and the actual price that a buyer pay for purchasing a commodity. It is also known as the maximum price that a buyer is ready to pay. It shows the sacrificing commodity on an amount for which a buyer pays.
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