Question

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

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).