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

Location

Price

80 70

55 80

65 50

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?

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