Chapter 7: Problem 15

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

The correct answer is option A. A product's utility to a buyer is best measured by its usefulness, as it directly reflects the satisfaction or benefit derived from the product, aligning with the definition of "utility" in economics.

Step by step solution

Understanding Utility

Utility is an economic term that refers to the satisfaction or benefit that a consumer derives from consuming a good or service. In simpler terms, it's the measure of how useful a product is, according to the consumer's preferences and needs. To find the correct answer, we need to analyze each option and determine which one best represents the measure of a product's utility to a buyer.

Analyzing Option A

Option A states that the product's utility to a buyer is measured by its usefulness. This option seems to be in line with the definition of utility. However, let's further analyze the other options before making a conclusion.

Analyzing Option B

Option B suggests that the product's utility is measured by its price. While the price of a product might play a role in determining its utility, it is not the only factor. Consumers might find a high-priced product to have lower utility if it doesn't fulfill their needs or preferences, while a cheaper product might offer more utility. Hence, this option is not the correct choice.

Analyzing Option C

Option C states that the utility of a product is measured by how much the buyer is willing to pay for it. This option is closely related to the concept of utility, as the willingness to pay can reflect how much a buyer values a particular good or service. However, the willingness to pay for a product is highly subjective and may vary greatly between different buyers. Thus, it may not be a precise measure of the product's utility.

Analyzing Option D

Option D says that none of the options measure the product's utility to a buyer. Given that we have found some relevance in options A and C, this choice does not seem valid either.

Choosing the Correct Answer

Based on the analysis of each option, the correct answer is option A. The product's utility to a buyer is best measured by its usefulness, as it directly reflects the satisfaction or benefit derived from the product, aligning with the definition of "utility" in economics.

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