Question

Scenario:

You have advised the owner of Bond's Gym that the best thing to do would be to raise the price of a monthly membership.

The owner wants to know what may happen once this price increase goes into effect.

What will most likely occur after the price of a monthly membership increases? Check all that apply.

Current members will pay more per month.
The quantity demanded for memberships will decrease.
The number of available memberships will increase.
The owner will make more money.
Bond’s Gym will receive more membership applications.

Answer 1

Check:
- Current members will pay more per month.
- The quantity demanded for memberships will decrease.

Do not check:
- The number of available memberships will increase. (Capacity or supply doesn’t automatically change when price rises.)
- The owner will make more money. (Revenue could rise or fall depending on how sensitive demand is to price—if demand is inelastic revenue rises; if elastic revenue falls.)
- Bond’s Gym will receive more membership applications. (Higher price typically reduces, not increases, applications.)