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.(a) Pecuniary price - If something has to do with money, it's pecuniary. If your grandfather's antique watch has pecuniary value, it's worth money — you could sell it for cash if you weren't sentimentally attached to keeping it.

In the above scenario the normal amount of bilk a consumer pays for the food and services is pecuniary price.

(b) Non-pecuniary price - Nonpecuniary price, under a price ceiling, is the amount of money a consumer is willing to pay above and beyond the price ceiling. This price is not paid in a dollar amount but rather an opportunity cost.

In the above scenario the extra amount the consumer pays to sit as soon as possible or extra charges for advanced booking is called the non pecuniary price.

(c) Full-economic price- The full economic price is the dollar amount paid to a firm under a price ceiling, plus the nonpecuniary price.

In the above scenario if the consumer gives extra charges for pre booking plus the normal amount of his bill value for food and argued is full economic price.

2. It occurs at the price where consumer willingness to demand exactly matches with that of firm willingness to supply. Thus intersection of both demand and supply curve generates the equilibrium price and equilibrium quantity. Setting market equilibrium price is considered to be one of the key factors.

Thus both the factors, elasticity of demand and elasticity of supply affects the full economic price.

4.

Taking these steps now will help you get your kitchen back up and running quickly when you're ready to reopen.

Quick checklist

1. Remove grease from frying units

2. Shut off water heaters

3. Shut off gas hookups to equipment

4. Check for gas leaks

5. Idle HVAC in the 50's

6. Remove grease from frying units and thoroughly clean

7. Move remaining food to walk-in coolers

8. Shut down small refrigeration units and freezers and sanitize interiors

9. Flush your beer taps

10. Cover and seal liquor bottles

11. Turn off dimmer switches

12. Consider turning off your water (case-by-case scenario)

13. Before reopening make arrangements for social distancing and sanitization .

Full instructions

1.Remove Grease from Frying Units

You’ll want to remove all grease from frying units and grease cooking units. Your frying units hold a lot of excess food particles that won’t show up when regularly held in hot temperatures. If you bring these to room temperature, things will start to grow. Make sure you clean your fryers after you’ve removed the food and before you leave.

2.Shut Off Water Heaters

3. Shut Off Gas Hookups to Equipment

4. Check for Gas Leaks

When your ovens are on all the time, it can be difficult to identify small gas leaks. Once you’ve turned off the gas hookups, check for any smell. If you detect a smell, go to where it’s strongest. Look for any pipes or fittings that are showing visible cracks or defects. Make sure you mark these spots and get them fixed and sealed. Note: Be prepared for pilot issues when you go to turn the gas on. It’s extremely likely that it could be difficult to get your pilots back up when your doors open. Be ready to work with your trusted hot side provider to get this resolved.

5. HVAC

. Idle the Air Conditioning

Keep it running, but keep it low. Take your thermostats to the high 50’s to save on electricity, without turning the system off completely. Reconditioning the entire restaurant's air after being off can cause compromised HVAC systems to fail. Better to spend a little to save what could be a lot.

6. Cold Side

Move Remaining Food to Walk-In Coolers

If you have food supplies that will last beyond your temporary closure, move these items from all small refrigerators and freezers to your walk-in cooler to save on electricity. If you do this, make sure you sanitize the interior of small refrigeration units and ice machines. You won’t notice food particles at near freezing temperatures, but these will start to grow the minute they are switched off. An alternative we’ve seen many customers and industry leaders do is send home all existing food supplies with their employees.

7. Beverage

8. Flush Your Beer Taps

If your beer taps will be closed for more than a week, you need to flush and clean the lines. If you don’t, your lines will grow bacteria and funk up the beers. Save yourself this step and call your local beer distributor to have them flush the lines for you.

9. Cover and Seal Liquor Bottles

Do this to prevent fruit flies and other insect infestations.

10. Plumbing

11. Turn off water

If no one is going to be in the space for an extended period of time, you may want to consider turning off your water. This is a case-by-case decision that needs to be made based off your unique situation. If you do decide to shut off your water, make sure you turn off hot water tanks.

12.Electrical

Turn off dimmer switches

13. Sanitation and social distancing is the new normal so focus on that.