Topic 1: why the restaurant prefer to provide the banquet menu for more than 6 people dinner?
1 Economies of scale are the cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. Often operational efficiency is also greater with increasing scale, leading to lower variable cost as well.
2 The cost advantage that arises with increased output of a product. Economies of scale arise because of the inverse relationship between the quantity produced and per-unit fixed costs; 3 for example, the greater the quantity of a good produced, the lower the per-unit fixed cost because these costs are shared over a larger number of goods. Economies of scale may also reduce variable costs per unit because of operational efficiencies and synergies.
4 In large scale operations workers can do more specific tasks. For example, if the cooker only do 2 or 3 types of banquet menu dishes, with little training they can become very proficient in their task, this enables greater efficiency. Moreover, if the restaurant buy a large quantity of food because of banquet dishes then the average costs will be lower. This is because of lower transport costs and less packaging.
1 However, economies of scale often have limits, such as passing the optimum design point where costs per additional unit begin to increase. Banquet menus are only available for a larger group of economies, the restaurant could not to achieve economies of scale through banquet menu. If the restaurant fix the menu to certain items then this will allow them to ensure that they can stock more of the items that are in demand. If customers can choose whatever they want, then the restaurant has to stock more of every single dish on the menu. This will lead to high cost and risk.
Topic 2: the price of the same products are different because of store location, how people choose between cheaper products but spend more time to buy it and the higher price product?
5 The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. 6 Assuming the best choice is made, it is the “cost” 7 incurred by not enjoying the benefit that would be had by taking the second best choice available. Opportunity cost is a key concept in economics, and has been described as expressing “the basic relationship between scarcity and choice” The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently.
If people choose cheaper price product but long distance, they may think that the value of time they spend to buy the cheaper product is lower than the money saved. For example, if people spend 20 minutes to drive to a chemist warehouse to buy some health food, the cheaper health food save $20 and the cost of 20 minutes is lower than $20. On the other hand, if people choose higher price product, they may think their time vale is higher than the money saved. So the opportunity cost should higher than the saved $20.
