Question

Consider a golf club in a small town that charges customers both a per-round price (P) and a club membership fee (F). Its management has estimated that there are 10 serious golfers (S) and 40 casual golfers (C). The estimated direct demand curves for each type of golfer is as follows:

Serious golfer: Q s = 120 − 2 P

Casual golfer: Q c = 80 − 2 P

The fixed costs of providing a round of golf are negligible and the marginal costs are equal to $10.

If the club sets its prices based on the preferences of the serious golfer, what are the profit-maximizing per-round price and membership fee?

If the club sets its prices based on the preferences of the casual golfer, what are the profit-maximizing per-round price and membership fee?

Answer 1