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Briefly explain why WTP(willingness to pay) is used to allocate goods and services in the economy...

Briefly explain why WTP(willingness to pay) is used to allocate goods and services in the economy and any potential drawbacks to using it

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Answer #1

Willingness to pay is used for its easiness in statistical measurement and analysis of mean of population for both active and passive use.

This also helps firms formulate competitive strategy, conducting value audit and development of new products.

However some potential drawback are that it doesn't encomlass calibrated view and lacks accuracy as real life consumption preferences keep changing due to versatility in different geographical regions.

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