Mustang has $100 of income per week available for recreational activities, including exercise, movies, restaurant meals, etc. Mustang's health club charges a fee of $4 per hour, and Mustang chooses to use the facility for 10 hours per week. a. Illustrate Mustang's consumption choice in a diagram with health club usage on the horizontal axis and other recreational activities on the vertical axis. b. Now Mustang's health club institutes a new pricing policy. A fixed fee of $30 per week is charged for access to the facilities, but then a rate of $1 per hour is charged for each hour of utilization. Is Mustang better off as a result of this change? Explain your answer using the diagram that you drew in (a).

Mustang has $100 of income per week available for recreational activities, including exercise, movies, restaurant meals, etc. Mustang's health club charges a fee of $4 per hour, and Mustang chooses to use the facility for 10 hours per week. a. Illustrate Mustang's consumption choice in a diagram with health club usage on the horizontal axis and other recreational activities on the vertical axis. b. Now Mustang's health club institutes a new pricing policy. A fixed fee of $30 per week is charged for access to the facilities, but then a rate of $1 per hour is charged for each hour of utilization. Is Mustang better off as a result of this change? Explain your answer using the diagram that you drew in (a).

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter5: Consumer Choice: Individual And Market Demand

Section: Chapter Questions

Problem 2TY

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