Problem 3 A product's utility to a buyer i... [FREE SOLUTION]

Chapter 19: Problem 3

A product's utility to a buyer is measured by (LO1) a) its usefulness b) its price c) how much the buyer is willing to pay for it d) none of the above

Short Answer

Expert verified

A product's utility to a buyer is measured by how much the buyer is willing to pay for it (Option C).

Step by step solution

Understanding Utility

Utility is a measure of satisfaction or happiness a buyer derives from consuming a product or service. It is used in economics to understand the buyer's preferences and choices among different products.

Examining Option A

Option A states that a product's utility is measured by its usefulness. While usefulness is indeed related to utility, it is not the same. A product might be useful, but the satisfaction the buyer gets from it may not necessarily be directly proportional to its usefulness alone. Therefore, option A is not the correct answer.

Examining Option B

Option B says that the utility of a product is measured by its price. However, this is incorrect. Price is simply the monetary value of a product, and it does not necessarily reflect the satisfaction a buyer derives from the product. In some cases, a buyer might be willing to pay more for a product with higher utility, but the price itself is not the measure of utility.

Examining Option C

Option C states that a product's utility is measured by how much the buyer is willing to pay for it. This is the correct answer. The willingness to pay represents how much value or satisfaction a buyer places on a product or service. The more utility a product provides, the higher the amount a buyer may be willing to pay for it.

Examining Option D

Option D suggests that none of the above options correctly describe how a product's utility is measured to a buyer. As we have already determined that option C is the correct answer, option D is incorrect. In summary, a product's utility to a buyer is measured by how much the buyer is willing to pay for it (Option C).