Question 2:

Your local leisure center has a large aquatic facility with a fancy swimming pool and it also has a state of the art gym. They offer three types of memberships, an aquatic membership, a gym membership and a bundle with both a gym and aquatic membership. They have three typical customers whose willingness to pay for each membership is given in the table below.

	Willingness to pay (per month)
	Aquatic	Gym
Julia	$100	$140
Michael	$120	$120
Helena	$160	$120

The leisure center has a constant monthly marginal cost of $75 for aquatic facilities, while gym facilities involve a constant monthly marginal cost of $90. These customers are considering joining the leisure center for both aquatic and gym memberships.

a) How much would the leisure center charge for aquatic and gym memberships if it sells these separately and would like all possible customers to purchase both services? Assuming all of these three customers join the leisure center, what is the center's total producer surplus in this case?

b)What price should the leisure center charge if they only offer aquatic and gym memberships bundled together and they want all of these customers to sign up with them? Assuming again that the leisure center signs up these 3 customers, what is their total producer surplus in this case?

c)Suppose that Julia hurts her back which limits the amount of gym classes she can take. Her new willingness to pay for a gym membership is now $50 per month. Explain whether the bundling strategy will benefit the leisure center if they want all three customers to buy the bundle. What could the leisure center do to maximise producer surplus with an alternative pricing strategy?