Answer to Question #172614 in Economics of Enterprise for Mirzokhid

Question

you can eat sushi is $21++ per person during lunch period. On the entrance door there is a sign warning of no wastages of food as wastages would be charged. You have done your research as most adult would eat about 6 to 7 plates of sushi of about 2 pieces of sushi per plate during lunch. The menu price per plate is $5 per plate if ordered separately from the buffet. The lunch period is 90 min per table. The wastage to be charged would be equivalent to the $5 per plate. You decide to improve the customers’ traffic into the restaurant and increase profits by having a promotion. You propose that the buffet price would not be changed but offer each patron a piping big bowl of ramen noodles for free as soon as the patrons are seated. The promotion attempts at analyzing that patrons would most likely not wait for the noodles to get cold to eat them. In your opinion, identify and explain the economic sense that is being applied here for the sushi buffet restaurant? 

Answer 1

$$Solution$$

Given , the current price of buffet in lunch = $\$21$

Price of sushi per plate separate from buffet= $\$5$

Let the average plate consumed in buffet hour =6

The revenue will be $\$ 30$ if they sold 6 plate separately from buffet. 

But the restaurant is charging $\$21$ for buffet. There may be a loss. 

The question arises why restaurant is selling the buffet. 

This is because of two reasons:

(1) There will be more demand of sushi in buffet. 

(2) The additional cost of making an additional sushi will be less. For example -A cook can make approximately 25 plates if it make sushi separately whenever they receive order. But in buffet he can make a sushi for approximately 200 plates as he is making all at once . This is reducing cost of labor .The restaurant is taking advantage of economies of scale . So, in buffet the cost of plate will be less and that's how restaurant earns. 

The promotion technique in which they serve noodles first is effective. This is because as one consumes noodles he will consume less plates of sushi. This will decrease the variable cost of restaurant and will increase the revenue.