The local swimming pool charges nonmembers $10 per visit. If you join the pool, you can swim for $5 per visit, but you have to pay an annual fee of $F. Use an indifference curve diagram to find the value of F that would make it just worthwhile for you to join the pool. Suppose that the pool charged you exactly that value. Would you swim more or less than you did before joining? Use income and substitution effects to explain your answer.
The local swimming pool charges nonmembers $10 per visit. If you join the pool, you can swim for $5 per visit, but you have to pay an annual fee of $F. Use an indifference curve diagram to find the value of F that would make it just worthwhile for you to join the pool. Suppose that the pool charged you exactly that value. Would you swim more or less than you did before joining? Use income and substitution effects to explain your answer.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 16SQ
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Question
The local swimming pool charges nonmembers $10 per visit. If you join the pool, you can swim for $5 per visit, but you have to pay an annual fee of $F. Use an indifference curve diagram to find the value of F that would make it just worthwhile for you to join the pool. Suppose that the pool charged you exactly that value. Would you swim more or less than you did before joining? Use income and substitution effects to explain your answer.
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