Consumer Demand Analysis and Estimation 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.
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 perdonut 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.

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