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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