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##### Bus 640, week 2 assignment

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Question;Consumer Demand Analysis and Estimation;Applied Problems;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.;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 Newton?s 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 Newton?s 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 Newton?s;Donuts and describe what it means. Describe your answer and show your;calculations.;Derive an expression for the inverse demand curve for;Newton?s Donuts. Describe your answer and show your calculations.;If the cost of producing Newton?s Donuts is constant at;$0.15 per donut, should they reduce the price and thereafter, sell more;donuts (assuming profit maximization is the company?s goal)?;Should Newton?s Donuts spend more on advertising?

Paper#54665 | Written in 18-Jul-2015

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