The CORNELL TENNIS CLUB currently sells court time at 25 per hour. Emma who is an undergraduate economics major has a monthly income of 300 and spends all of her income on court time and movie tickets, where the price of a movie ticket is 5. Currently, Emma purchases 8 hours of court time per month and 20 movie tickets. The TENNIS CLUB is considering a new pricing scheme. In this new scheme the CLUB would charge a membership fee of 120 per month, while the price for court time would be 10 per hour. Finally, assume that Emma's indifference curve map satisfies all of the standard assumptions of indifference curve analysis. i) Draw a budget line for Emma that corresponds to the initial situation and one that corresponds to the new scheme the CLUB is considering. Graph movie tickets on the vertical axis and court time on the horizontal axis. ii) Is there enough information to conclude which pricing scheme Emma would prefer, and if there is enough information, which pricing scheme does she prefer? Explain your reasoning. Now suppose that the TENNIS CLUB is considering a different pricing scheme. In this new scheme the first 4 hours of court time per month would cost 40 per hour, while the hours above 4 in any month would cost 10 per hour (the new scheme has no membership fee). iii) Is there enough information to conclude whether Emma prefers the original pricing scheme where she is charged 25 per hour or this new pricing scheme? If there is, which pricing scheme does she prefer? Explain your reasoning. iv) Same question as in iii) but now assume that the first 4 hours of court time per month would cost 60 per hour, while the hours above 3 in any month cost 10 per hour. Also, assume that with this new pricing scheme Emma would purchase 10 hours of court time per month and 10 movie tickets. The CORNELL TENNIS CLUB currently sells court time at 25 per hour. Emma who is an undergraduate economics major has a monthly income of 300 and spends all of her income on court time and movie tickets, where the price of a movie ticket is 5. Currently, Emma purchases 8 hours of court time per month and 20 movie tickets. The TENNIS CLUB is considering a new pricing scheme. In this new scheme the CLUB would charge a membership fee of 120 per month, while the price for court time would be 10 per hour. Finally, assume that Emma's indifference curve map satisfies all of the standard assumptions of indifference curve analysis. i) Draw a budget line for Emma that corresponds to the initial situation and one that corresponds to the new scheme the CLUB is considering. Graph movie tickets on the vertical axis and court time on the horizontal axis. ii) Is there enough information to conclude which pricing scheme Emma would prefer, and if there is enough information, which pricing scheme does she prefer? Explain your reasoning. Now suppose that the TENNIS CLUB is considering a different pricing scheme. In this new scheme the first 4 hours of court time per month would cost 40 per hour, while the hours above 4 in any month would cost 10 per hour (the new scheme has no membership fee). iii) Is there enough information to conclude whether Emma prefers the original pricing scheme where she is charged 25 per hour or this new pricing scheme? If there is, which pricing scheme does she prefer? Explain your reasoning. iv) Same question as in iii) but now assume that the first 4 hours of court time per month would cost 60 per hour, while the hours above 3 in any month cost 10 per hour. Also, assume that with this new pricing scheme Emma would purchase 10 hours of court time per month and 10 movie tickets
