Question

When making a choice between various sizes of a product, the best value is the size with the lowest price.

(A) The Statement is false because the best value should be the product with the lowest unit price, assuming that the units are kept uniform.
(B) The statement is true because the size with the lowest price could save you much money.
(C) The statement is false because the best value should be the product with the highest unit price, assuming that the units are kept uniform.
(D) The statement is true because it is easy to find the size with the lowest price.

Answer 1

While seeking the best value in a product, look for the lowest unit price rather than just the lowest price. Variety introduces opportunity cost, potentially increasing per-unit prices. In the goods market, buyers may pay more than the equilibrium price based on perceived value or urgency.

Step-by-step explanation:

The best value when choosing between various sizes of a product is not necessarily the one with the lowest price, but rather the one with the lowest unit price, given uniform units. This ensures that you are getting the most for your money, and is particularly important when budgeting and seeking to maximize utility. The general rule is that the utility-maximizing choice occurs when the marginal utility per dollar spent is the same for both goods. Considering efficiency versus variety, each product tends to cost more per unit due to the variety available—this is the opportunity cost of having multiple options.

Additionally, it is incorrect to assume no buyer would be willing to pay more than the equilibrium price in the goods market. Consumers' preferences and values vary and some may be willing to pay a premium for goods or services they perceive as superior, necessary, or urgently needed, pushing their valuation above the equilibrium price.