Consumer Demand Analysis and Estimation Applied Problems, assignment help
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Consumer Demand Analysis and Estimation Applied Problems**** Original answers with each part labeled**** plagiarism free with plagiarism report attached!!!!
Please complete the following two applied problems:
Problem 1:
Patricia is researching venues for a restaurant business. She is
evaluating three major attributes that she considers important in her
choice: taste, location, and price. The value she places on each
attribute, however, differs according to what type of restaurant she is
going to start. If she opens a restaurant in a suburban area of Los
Angeles, then taste is the most important attribute, three times as
important as location, and two times as important as price. If she opens
a restaurant in the Los Angeles metropolitan area, then location
becomes three times as important as taste and two times as important as
price. She is considering two venues, respectively, a steak restaurant
and a pizza restaurant, both of which are priced the same. She has rated
each attribute on a scale of 1 to 100 for each of the two different
types of restaurants.
|
steak restaurant Pizza restuarant |
|
Taste |
80 70 |
Show all of your calculations and processes. Describe your answer for each question in complete sentences.
- Which of the two options should Patricia pursue if she
wants to open a restaurant in a suburban area of Los Angeles? Calculate
the total expected utility from each restaurant option and compare.
Graph is not required. Describe your answer, and show your calculations. - Which of the two options should she pick if she plans to
open a restaurant in the Los Angeles metropolitan area? Describe your
answer, and show your calculations. - Which option should she pursue if the probability of
finding a restaurant venue in a suburban area can be reliably estimated
as 0.7 and in a metropolitan area as 0.3? Describe your reasoning and
show your calculations. - Provide a description of a scenario in which this kind
of decision between two choices, based on weighing their underlying
attributes, applies in the real-world business setting. Furthermore,
what are the benefits and drawbacks, if any, to this method of decision
making?
Problem 2:
The demand function for Newtons Donuts has been estimated as follows:
Qx = -14 54Px + 45Py + 0.62Ax
where Qx represents thousands of donuts; Px is the price per
donut; Py is the average price per donut of other brands of donuts; and
Ax represents thousands of dollars spent on advertising Newtons Donuts.
The current values of the independent variables are Ax=120, Px=0.95,
and Py=0.64.
Show all of your calculations and processes. Describe your
answer for each question in complete sentences, whenever it is
necessary.
- Calculate the price elasticity of demand for Newtons
Donuts and describe what it means. Describe your answer and show your
calculations. - Derive an expression for the inverse demand curve for Newtons Donuts. Describe your answer and show your calculations.
- If the cost of producing Newtons Donuts is constant at
$0.15 per donut, should they reduce the price and thereafter, sell more
donuts (assuming profit maximization is the companys goal)? - Should Newtons Donuts spend more on advertising?
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