local Pilates studio recently began offering a monthly subscription service for its patrons. Suppose a particular patron at this studio has the following willingness-to-pay schedule, per session. Session Willingness to Pay 1st $70 2nd $60 3rd $50 4th $40 5th $30 6th $20 Suppose this consumer would
local Pilates studio recently began offering a monthly subscription service for its patrons. Suppose a particular patron at this studio has the following willingness-to-pay schedule, per session. Session Willingness to Pay 1st $70 2nd $60 3rd $50 4th $40 5th $30 6th $20 Suppose this consumer would
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter11: Public Goods And Common Resources
Section: Chapter Questions
Problem 9PA
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2. Individual Problems 14-2
A local Pilates studio recently began offering a monthly subscription service for its patrons.
Suppose a particular patron at this studio has the following willingness-to-pay schedule, per session.
|
Session
|
Willingness to Pay
|
|---|---|
| 1st | $70 |
| 2nd | $60 |
| 3rd | $50 |
| 4th | $40 |
| 5th | $30 |
| 6th | $20 |
Suppose this consumer would not demand any more sessions, even for free. Also assume that the marginal cost to the studio, per session, is constant at $10.
At a price of $55.00 per session, the number of sessions demanded by this consumer would be ___?__
. At this price and quantity, consumer surplus is ___$?__
and producer surplus is ___$?__
.
Suppose the studio has devised a new pricing scheme for consumers who demand more than 1 session. This pricing scheme is a subscription service, whereby consumers can pay a flat fee of $202.50 and can have up to 6 sessions total.
Using this subscription pricing model, this consumer would demand ___?____ sessions. Under this scenario, consumer surplus is ___$?__
and producer surplus is ___$?__
. (Hint: For consumer surplus, consider how much total value the consumer places on all sessions, versus the total price paid.)
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