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4) The “Fox Cabaret” is a popular Vancouver nightclub. Assume it has adopted the following pricing...

4) The “Fox Cabaret” is a popular Vancouver nightclub. Assume it has adopted the following pricing policy. To enter the club on a Friday or Saturday evening, you pay a cover charge of $20. When you enter the club you then pay $10 for each alcoholic beverage you consume. Explain the logic of this pricing system from an economist’s perspective.

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Ans) Cover charge is a entry amount which is mainly charged by popular nightclub. Many clubs charges low cover charge as much as possible. If "Fox Cabaret" is charging $20 as cover charge then it wants to reduce demand, as the price of entry is high so the demand or who want to entry in this club will reduce, and after that it will not face loss because of the popularity in the region. To reduce the demand / line over the counter they will follow this policy. To reduce the consumption of alcoholic beverage he charged $10. As alcohol is a bad commodity in the economics terms because it is not good for health so for reduction of demand for alcohol they started $10 for per glass basis. And most of the people went to nightclub mainly on weekend (Friday Saturday), so after this policy less people will go on this nightclub but the supply or on the services provided for entertainment will not get be much affected by this pricing policy.

Rahul Sunny answered 11 months ago
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