Question

Because of the COVID-19, there are some restrictions on the number of customers on the same table and the distances between tables in the restaurant. Therefore, during lunch or dinner hours, patrons of many restaurants need to wait for a long time before there are tables for them.

a) Explain the concepts of “pecuniary price”, “non-pecuniary price” and “full-economic price” using this example with a diagram.

b) Is the full-economic price affected by the price elasticity of demand, the price elasticity of supply, or both? Explain. (No diagram is needed).

c) As a manager of a Chinese restaurant and you would like to develop a linear demand function of your restaurant. Suggest FOUR variables that you will include in this function and also indicate whether the coefficient of the variables is positive or negative number with brief explanation.

d) What should the restaurant managers consider when they are making the decision on the temporary closure of restaurants during the period of COVID-19?

Answer 1

1. Something happens with money is basically stand for Pecniary price. For example:- You have a Mercedes benz and no sentiments has been attached to it and you want to sell that car for monetary value, then it will stand for Pecniary value.

On the other hand,

2. Non-Pecniary price is something which you cannot compare to monetary terms. Such as feelings,pain,suffering etc.. .

And

3. Full economic price basically include the willingness of consumers that how much they are willing to pay above the price ceiling..

basically it is like that even if you have to pay more or you have to wiat in que or something for a long time lets say for 3 hrs for something then you will willing do that to purchase an product as per your requirement.

For example:- A long time ago in 90's let's suppose the rate for the petrol was 1 dollar.

To purchase 15 ltr or petrol one had to wait for 3 hrs.

and the opportunity cost for that was 5 dollars per hrs.

So, Total value of time spent 3*5 dollars= 15 dollars

Non-pecuniary price per petrol: 15 dollars divided by 15 that would be = to 1 dollar

And full economic price for petrol would be: 1 dollar + 1 dollar= 2 dollars.

following a picture has been attached where thiss example has been explained through an diagram.

B) yes it has a affect on both price elasticity of demand and supply. Price elasticity is the factor basically a response of demand which affect the movement of price. Change is demand and price affect each other. As, income elasticity define that there is a change in demand because of the change in consumer's income.

It is basically a percentage change in quantity of demand to the propotion changed in price. And this shift the supplu and demand to its equilibrium point.

As we have mentioned in the (a) part also that due to the high demand of petrol adversly affecting the demnd of supply too.

We can simply say that if the demand of XYZ product in the market is high and we apply the concept of full economic price, then even if the price of that particular product will be high then people will do purchase that product. And it will also affect the elasticity of supply. As if the demand will increase then the productivity will also rise and supply will automtically goes up.

C) Well, yes there are 4 points which i will strictly follow nd that are mention below:-

1. I will study and observe the environmental factors that how it will gonna impact my resturants.

2. Will watch the managerial activities and tasks will be performed by the management. Because that will help me to analyze the performance of my restaurant. And i can make improvements on the lacking parmeters or area.

3. Will definitely look into the macro environment. As i have mentioned in the earlier point that will watch the managerial activity of the management. So, that would be a part of micro-envirinment. And the study of whole market will be a part of macro-environment. Which is really so indispensable to observe to attain all the goals of my resturants.

4. Will categorize the acivity and task of the resturant in the strategic list.So, that I'll be clear with my priorties and goals towards succession.

5. Last but no least, as we know there is a term PASTEL which has a vast meaning and have a very deep definations and parts and categories. So, there are abundance of challenges for a restaurant.Basically for it's managerial team ofcourse. So, identification of challanges making strategies to tackle them for a long term period and planning tectics to handle it for short-term period is a biggest thing to evaluate and implement..

D) Well, this temporary closure of an business is such a tough job to do. So, on the prespective of Covid-19 situation a temporarily closure of a restaurant will lead to so many difficulties and various decision has to be taken by an manager and that possibly could be like which will not affect it's customers and also not affect it's reputation. So, various points could be some possible decisions which a manger would take in such a difficult situation:-

1) First a manager should check and cancel all the pre-bookings and refund their money by deducting the appropriate charges so that he will not loose his/her customers.

2) Then will have to make an quick checklit in which every important detail should be mention that what they have to do in the prioritize list and what not. For example: Removing grease and oil from the frying utensils,checking the gas holes etc to make sure that their is no leakage and all, should cut the supplies of electricitya nd water on temporary basis so that unnecessary power would not waste.

3) Should check that everything should be alligned like that where no wastage of resource will happen and also which do not affect any economic and  environmental factors.

4) A manager should clear the salaries and bills so that he will not face any debt further.

5) a manager should have an backup plan to tackle the difficult situation.

6) A manger should apply the adaptive nature.

7) Rather to lay off their employees a manger can send them to leave without pay by clearing their all previous salary and incentives.