Personal training is your life, but you haven't increased your hourly rate since you started six years ago. You're still charging $50 an hour, when you really should be charging $80, given the excellent results you get. Based on what you know about the various factors that influence elasticity of demand, you:
A) decide people think of your services as a necessity, which means that demand is fairly inelastic and it would be safe to increase your rate to $65 an hour.
B) decide people think of your services as a luxury, which means that demand is elastic and you can only raise your rate to $55 an hour.
C) aren't sure how elastic demand is, which means it would be best to raise your prices incrementally over the next year.
D) realize that elasticity is irrelevant, and that people will agree you're worth the $80 an hour.

Question

Quizplus · Accepted Answer

Given the uncertainty about the elasticity of demand for personal training services, which can be seen as either a necessity or a luxury depending on the client's perspective, the safest approach is to incrementally increase prices. This allows for observation of the market's reaction and adjustment accordingly, minimizing the risk of losing clients due to a sudden large increase.

Personal Training Is Your Life, but You Haven't Increased Your