The market demand for gym memberships in North Florida is given by the equation Q D...

The market demand for gym memberships in North Florida is given by the equation

Q D N = 1000 − 20 p,

and the market demand for gym memberships in South Florida is given by the equation

Q D S = 1200 − 40 p.

Price is measured as the monthly membership fee and quantity is measured as memberships per month. In this problem assume North Florida and South Florida are separate and independent markets.

(a) Suppose the membership fee (price) is $40 per month in each market. Calculate the number of gym memberships that are expected in equilibrium in each market.

(b) Now suppose the membership fee (price) falls to $10 per month in each market. Calculate the number of gym memberships that are expected in equilibrium in each market.

(c) Using the $10 membership fee, calculate the price-elasticity of demand at the equilibrium in each market. Use the point elasticity approach.

(d) Using the $10 membership fee, calculate the total expenditures by consumers (TE) in each market.

(e) Using the $10 membership fee, calculate the total consumer surplus (CS) in each market.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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