Which term refers to the maximum price a customer is willing to pay for a good?

The term that refers to the maximum price a customer is willing to pay for a good is known as the reservation price. This concept plays a vital role in consumer behavior and demand theory. The reservation price reflects the highest price at which a consumer values a good or service; if the market price exceeds this point, the consumer will decide not to make the purchase. Understanding this concept is crucial for businesses when setting prices, as it helps them to gauge consumer willingness to pay, inform pricing strategies, and maximize revenue. It is also essential for market dynamics, where the intersection of various reservation prices from different consumers affects overall demand for the product.