Sources used in this document:

What factors affect demand for our products? Regardless of the economy, people still need to eat. Because many consumers of our food may be working two jobs or more to make ends meet, the demand for a convenient, tasty meal at an affordable price increases demand for our food. In addition, consumers seeking to indulge themselves on a limited budget often turn to our food for a "treat." (Bittman, 2009). The great demand for our products seems to indicate that we could increase our prices slightly. Would this lead to a greater profit, though? Or would it decrease demand too significantly, causing a decrease in profits?

The price of many of the requisite supplies for our McDonald's franchises are on the rise. From the price of milk to the price of oil, increasing prices make it more expensive for us to make our food. (Doherty, 2007) Should these costs be passed on to the consumer? If they are, will demand for our products decrease? If we examine the rising price of milk, the data seems to suggest that demand would not be decreased significantly. According to Regan Doherty, "With milk, as with gasoline, consumers have a hard time turning away even when prices soar." (Doherty, 2007). The information in this article suggests that the shortage of milk (and, by extension, gasoline), has lead to a price increase, yet demand remains high. It can be surmised that demand for these products is relatively inelastic. Does McDonald's fit into a similar inelastic demand paradigm? One factor in determining elasticity is relative competitiveness. (University of Michigan). The data suggest that increasing prices slightly to meet the raising cost of purchasing supplies for our food will not hurt McDonald's bottom line, because McDonald's biggest competitors -- namely, Burger King, Wendy's, and other fast food burger chains -- will have their prices influenced by the price of supplies in a similar fashion.

Should the government choose to raise the minimum wage, will this increase or decrease the demand for McDonald's food? The answer to this question depends upon two factors: Whether or not McDonald's food has negative elasticity; meaning, as the consumer's income increases, demand for the product decreases. (Rittenberg, Tregarthen). The other factor is whether or not an increase in the minimum wage would be sufficient to allow negative elasticity to occur. The answer to the latter question seems simple; minimum wage, unless increased exorbitantly, would hardly be enough to elevate a consumer's income level to that of the wealthier consumers who tend to eschew fast food altogether. (Krugman, Wells, 158). Since there is little danger of an increase in minimum wage creating a state of negative elasticity, economic theory dictates that the inelastic nature of food purchases would lead to either an increase in the demand