pricing scheme for consumers

pricing scheme for consumers

pricing scheme for consumers

5 . Individual Problems 14-2

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 $70
2nd $60
3rd $50
4th $40
5th $30
6th $20
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 $10.

At a price of $65.00 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 $216.00 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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