True or false and why 1A buyer is willing to buy a product a

True or false and why?

1.A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay

Solution

Solution-

This is a FALSE statement.

A buyer would buy the product at a price equal to his willingness to pay or at a price less than his willingness to pay, but would refuse to buy a product at a price grater than his willingness to pay.

Willingness to pay shows the maximum price that a buyer is willing to pay for a product. It is also known as reservation price. So, he would purchase the product only in two cases-

1. Its actual price is equal to the willingness to pay for the product, or,

2.Actual Price is less than willingness to pay.

In case 1, Consumer surplus ( Difference between reservation price and actual price) is zero and in Case 2, consumer surplus is positive and the consumer will gain.

When actual price exceeds his willingness to pay, the consumer will be in loss after buying the product as consumer surplus will be negative. Thus, consumer will not buy the product in this case.

d