As a manager of Indy Fitness Club, you face the following monthly demand curve for its membership:
is the quantity demand of membership and P
is the price of membership. Suppose the current monthly price of membership is $20.
(a) How many membership are sold monthly at the current price?
(b) Calculate monthly total revenue at the current price.
(c) Calculate point elasticity of demand for membership at the current price. Is the demand elastic, inelastic or unitary elastic?
(d) A friend of yours who is an economist recommends you to charge $25 in order to maximize monthly total revenue. Calculate monthly total revenue and point elasticity of demand at $25 to examine if the recommendation is true.