=+7.8* Business Application: Sam’s Club and the Marginal Consumer: Superstores like Costco and Sam’s Club serve as wholesalers to businesses but also target consumers who are willing to pay a fixed fee in order to get access to the lower wholesale prices offered in these stores. For purposes of this exercise, suppose that you can denote “goods sold at superstores” as x1 and “dollars of other consumption” as x2

.

A. Suppose all consumers have the same homothetic tastes over x1 and x2

, but they differ in their income.

Every consumer is offered the same option of either shopping at stores with somewhat higher prices for x1 or paying the fixed fee c to shop at a superstore at somewhat lower prices for x1

.