Economic Recession, Coupled With a Federally Mandated

¶ … economic recession, coupled with a federally mandated raise in the minimum wage, affect the demand for McDonald's fast food? How do fluctuations in the cost of feed for cattle, in crop output, the cost of oil, and all the factors that go into producing our food effect our supply? Most importantly, how can we adjust to meet demand, comply with government regulations, and still earn a profit? The following analysis studies the ways we can adjust supply to increase quantity demand for McDonald's food products, the way we can adjust the price of our product without sacrificing customer service our quality, and the way we can maintain a comfortable profit margin in current economic conditions.

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.