Question
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
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 $77
2nd $66
3rd $55
4th $44
5th $33
6th $22
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 $11.
At a price of $60.50 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 $222.75 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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