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The fast-food industry business model is to provide filling food at a low cost. A fast-food restaurant such as McDonald’s lacks in quality, so, they make up for in quantity. Each value meal provides a tremendous number of calories. This provides quite a contrast with fine dining. At fancy establishments, the portions are smaller by design. You are to answer the following questions
What makes someone willing to pay significantly more when dining out at fancy establishments even though the portions are quite small? The answer will not be as simple as people pay for the service and a nice environment. The question asks “why” they are willing to pay for that. When answering this question, please refer to and include the concept of marginal and total utility.
McDonald’s example here is a lot like water in the diamond-water paradox. Please discuss this point on how you understand this statement. Again, please refer to the concept of marginal and total utility.
Please come up with at least two examples of the diamond-water paradox ( two pairs of products). Note that luxury goods do not automatically mean “diamond” and cheap (inferior) goods do not automatically mean “water.”