David A. Keith

BUS 640Managerial Economics

InstructorZhiminHuang

September 27, 2017

Problem OneA.

Which of the twooptions 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.

With giving information for solvingproblem one goes to show the importance of taste to the public just as much as cost for foods in opening her restaurant within LA regions. In addition, if we use weight score methods, where weight within 3 attributes are calculated will look like:

Thetasteequals 6 divided by (6+2+3) equals 6 divided by 11

Forlocationsequals 2 divided by (6+2+3) equals 2 divided by 11

Forpriceequals 3 divided by (6+2+3) equals 3 divided by 11

The expected sum utilities within posting therestaurant for steaks in LA equals 6 divided by 11 times 80+2 divided by 11 times 55+ 3 divided by 11 times 65 equals 71.36.

The expected sum utilities within posting the restaurant for pizza in LA equals 6 divided by 11 times 70+2 divided by 11 times 80+3 divided by 11 times 50 equals 66.36.

Problem Two B.

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.

Within this problem, we see the importance of locations inopeninga business which is just as important to Patricia as price is to her. This comes as much:

Thetasteequals2 divided by (6+2+3) equals 2 divided by 11

Thelocationsequal 6 divided by (6+2+3) equals 6 divided by 11

Thepriceequals 3 divided by (6+2+3) equals 3 divided by 11

The sum of these utilities expected comes with restaurant for steaks within the metropolitan regions, equal 2 divided 11 times 80+6 divided by 11 times 55+3 divided 11 times 65 equals 62.27.

The sum of these utilities expected comes with restaurant for pizza within the metropolitan regions, equal 2 divided by 11 times 70+6 divided by 11 times 8+3 divided by 11 times 50 equals 70.

Within these sums, it is seen that Patricia would be likely to go for restaurant for pizza in LA.

Problem One C.

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.

The cause for searching in a suburban region for a business equals to point 7

The cause for searching in a metropolitan region for a business equals to point 3

Thisbrings us to the restaurant for steaks equaling to .7 times 71.36 plus .3 times 62.27 equals 68.64.

This brings us to the restaurant for pizza equaling to .7 times 66.36 plus .3 times 70 equals 67.45. it is seen that Patricia is better at opening the restaurant for steak because of expected utilities being high within that location.

Problem One D.

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 thismethod of decision making?

In the world we live in today, weight measures in doubles of attributes based upon how those in charge of shipments and supplies handle their parts in delivering these goods through good attributesand services. These goes within reasons of dimension of qualities, cost of competitors, technology abilities and levels of service. Advantages of usage within methods of average weightiness scores within groups of underlined attributes sums up to be in multitudes of other evaluated means through lesser times. Negative results go with methods of these being tended to highlight means of what is important within being persuaded by others in bias and ending with negative results.In addition, these methods can also be subjected to assessment’s then objective assessments because of loss of methods scientifically speaking weighting within measures.

Problem Two A.

Calculate the price elasticity of demand for Newton’s Donuts and describe what it means. Describe your answer and show your calculations.

Demanded functions for Newtons Donut business has the following processes forQxequals minus 14 minus 54Pxplus 45Pyplus 0.62 Ax.Qxrepresent many donuts counts withPxpriced for every donut, andPyregular priced donuts from a different brand, and Ax represent much funds they invested in Newtons Donuts. Recent value means to how variables are adjusted are Ax equals 120 toPxequals 0.95 toPyequals 0.64. In addition,Qxequals -14minus 54 times .95 minus 45 times 64 minus .62 times 12 equals 37.9. The elasticity price of demand represents percentages changing in quantities of divided uses by percentages changed within pricing (Douglas, 2012). This represents the usages of methods by E towards p equalsQP times PQ, bringing it toQPxequals -54. Within this data, elasticities for price demands are calculations to equals -54 times .95 divided by 37.9 equals -1.35. Through these measures of demand forone’sproducts decreasing by 1.35 percent to each 1 percent increasing in prices or demands within these products of increased means bythese calculations.

Problem Two B.

Derive an expression for the inverse demand curve for Newton’s Donuts. Describe your answer and show your calculations.

Inversed demand curves are calculated through formulas ofPxequals f(Qx).

By use of demand functions being applied makes itQxequals -14 minus 54Pxplus 45Pyplus 0.62 Ax or,Pxequals (-14+45Py plus 0.64 Ax minusQx) divided by 54, as given toPxequals 1 divided by 54 times (89.2-Qx).

Problem Two C.

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)?

When it comes to costs for given donuts being at .15, brings to priced elasticizes of demands being at -1.35. This decreased prices by 1 percent, while increased by 1.35 percent. Through all means, Newtons Donut business decreased pricestoincrease profitsthrough increased demands. In addition, few of these prices have the demand of elasticity pricing and unites over the limit point to where prices will have the tendency of decreasing.

Problem Two D.

Should Newton’s Donuts spend more on advertising?

Through demand equations, there is usage to advertised expenses increasing by one dollar through demands increasing by .62 times 1 equals .62. These increases within profits from increased demands equals 6.2 times (.95 minus .15) equals .496, bringing to low forms of cost being increased by 1 dollar. Newton need to remain in proper standards of keeping things the same.

References:

Douglas, E. (2012). Managerial Economics (1st Ed.). San Diego, CA: Bridge point Education.

Department of Finance and Personnel (2014). The Weighing and Scoring Method,

IGS. Retrieved from:http://www.dfpni.gov.uk/eag-the-weighing-scoring-method