Answered: local Pilates studio recently began…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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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