Week 3 – Discussion 1 Two partners own together a small landscaping business in North Carolina, called Summer Lawn Care. They have been specializing in summer grass seeding, installa±on, and maintenance. Recently, the partners acquired special technology and know-how for winter grass installa±ons and maintenance. They also added a tree cu²ng service as recent storms in the area had caused demand for this service to soar. One of the partners insists that the name of the business should change to Lawn and Tree Care, so that it be³er reFects the range of services and, thus, generates more customer interest, and thus contracts. The second partner wants to keep the old name and argues, “We have already paid for business cards, vehicle paint, signage, and ads in Yellow Pages”. Evaluate the arguments of the two partners. Explain and illustrate their points by iden±fying the relevant and irrelevant costs for this decision. Guided Response: In 300 words or more, please, provide your response to the above discussion ques±on. Iden±fy all the costs in the decision process, including explicit costs, implicit costs and sunk costs. In evaluatng The decision To change The name of The company, The relevanT and irrelevanT cosTs need To be considered. WiThin The relevanT and irrelevanT cosTs are impliciT cosTs, expliciT cosTs, sunk cosTs, unavoidable cosTs and incremenTal cosTs.
MANAGERIAL ECONOMICS DECISIONS WITH ATTRIBUTE ASSIGNMENT AND ELASTICITY OF DEMAND FOR NEWTON’S DONUTS 3 Abstract. This paper describes two problems. Problem one consists of use of an attribute-assigning and decision making model quantifying two alternatives in food service and restaurant location. It calculates and recommends type of food served and restaurant location based on taste, location, and price attributes and importance of them in each of two locations. Problem 2 calculates elasticity of demand for Newton’s donuts using a demand curve supplied in the problem. It answers questions of price elasticity of demand, inverse demand curve, and profitability of increasing advertising spending. Problem One A suburban restaurant location’s taste attribute is three times as important as location and two times as important as price. So, for the taste, location, and price attributes of suburban steak restaurant business, the following assigned attributes must be weighted in terms of importance. Taste is assigned a value of importance in attribute of 1. Since taste is three times as important as location, then location importance = 1/3. And taste is two times the importance of price, then price importance = ½.