Consumer Demand Anaylsis

In this paper I will discuss consumer demand and estimation applied problems. Patricia is researching venues. She is focusing on three main attributes of taste, location and price. Product attributes is defined that consumers buy products because of the product attributes, which is the benefits consumers perceive to be delivered by those products (Douglas, 2012). She is considering two venues of a steak restaurant or a pizza restaurant. According to the problem, both venues are priced the same. The utility –maximizing model of consumer behavior says that individual consumers make decisions to buy products based on the expectation that the purchase will allow them to gain the most psychic satisfaction, utility, from their limited incomes (Douglas, 2012). Patricia has rated each attribute on a scale of 1 to 100. The scale is shown below.

Patricia also mentioned that if she opens a business in suburban area of Los Angeles, then taste is the most important attribute. If she opens in the metropolitan area of Los Angeles, then location is the most important. The first question to be addressed is to decide which restaurant to open if she wants to be located in the suburban area of Los Angeles. I will chose by calculating the total expected utility from each restaurant. The restaurant she should chose would be the steak restaurant. You would chose the restaurant with the higher value. The next question is restaurant if she decides to open in the metropolitan area of Los Angeles. The choice would be the pizza restaurant. The next question asks which option she should pursue if finding a restaurant in a suburban area is .7 and finding one in a metropolitan area is .3. From my understanding, she should pursue the one with the higher probability which is the suburban area. The last question for this scenario is to describe between the two scenarios based on their underlying attributes for the real word setting. According to Douglas, businesses try to have an attribute...