The owner of a health club asks you for advice about whether the company should raise or lower the price of its membership this year based on the following information: last year the club raised the price of its membership by 5% and the number of
members paying the same fee fell by 7%.
Please provide the best answer for the statement.
The formula for the price elasticity of demand indicates the demand for memberships is price elastic or 1.4 in this case (7 divided by 5). This result suggests that total revenues for the club should have decreased last year. Another increase in price this year would only decrease total revenues. You should advise the owner to lower membership prices because it should increase total revenue given that the membership price is in the elastic range.
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In the long run, a firm should exit when:
A) price is less than average total cost. B) price is equal to average total cost. C) price is equal to marginal cost. D) price is more than marginal cost.
An example of a fungible commodity is:
A. oil. B. gold. C. aluminum. D. All of these are fungible commodities.
A situation in which output decreases while prices increase is often referred to as:
A. inflation. B. negative economic growth. C. a recession. D. stagflation.
Output prices = flexible or inflexible Input prices = flexible or inflexible
What will be an ideal response?