If Bond's Gym set their membership price at $45, would they experience a shortage of memberships (not enough to meet demand) or a surplus of memberships (plenty of memberships available but not enough customers), and by how many memberships?

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Hanson

5 April, 00:22

If Bond's Gym set their membership price at $45, would they experience a shortage of memberships (not enough to meet demand) or a surplus of memberships (plenty of memberships available but not enough customers), and by how many memberships?

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Ryder Parrish · Answer 1

The answer depends on a crucial information that it is not provided, the purchasing power of those potential customers, but it still it is possible to reason how the demand and supply of membership would work.

Surplus of memberships would take place when in the gym market there is a shortage of demand. This situation occurs when there are less customers willing to purchase the product at 45$ than the number of memberships that are available. To claim if this is the case in the example we would need to know the structure of the demand function in this market. Shortage of memberships takes place when in the gym market there is a excess of demand. The price is afforded by a number of customers which exceeds the amount of memberships available. Therefore, some rationing mechanism would be necessary to fix who will get the membership and who will not. Again, it would be necessary to know who the demand function works.