week 2 assignment marketing class.docx

# This would appear below as for both businesses steak

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multiplied by the total utility in each business. This would appear below as for both businesses: Steak- (.7*392.50)+(.3*342.50)=377.50 Pizza- (.7*365)+(.3*385)=371 In this situation the steak restaurant would be the better business choice being that in both areas the expected probability, even considering that we would have to find a building is higher with a steak restaurant versus starting a pizza 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 this method of decision making? -A scenario that would be the perfect example of this would look in the real world would be the opening of retail stores for T-Mobile. When considering doing this a lot of time and effort is put into starting these businesses. Depending on the area basically determines the volume of the business giving the business owner an idea of what to expect as a profit in return. Of course opening a store in the middle of downtown would incur a higher traffic volume versus a store that’s opened up in a more rural area. According to Douglas this takes a large amount of time to consider and plan out due to

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Week 2 Assignment 5 the fact that different variables that, “Cause the consumer’s demand curve for a product to shift are immensely important to the manager trying to maximize profits” (Douglas 2012). 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. a. Calculate the price elasticity of demand for Newton’s Donuts and describe what it means. Describe your answer and show your calculations.
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