Factors affecting McDonald's product demand and supply

McDonald's

Consider what your firm produces. What are some things that would change the demand for your product? How does quantity demanded change?

McDonald's produces fast food products. Its main products are French fries, hamburgers, and various chicken products including chicken sandwiches and chicken nuggets. McDonalds also sells other products that face different demands depending upon location, including coffee, breakfast products, desserts, and even pork sandwiches. "Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship" (Investopedia, 2012). One of the reasons that demand for McDonald's products is relatively high is that McDonald's is able to keep pricing low because they have an adequate supply to meet demand. Therefore, changes in supply will lead to changes in demand because of price differences. However, simply looking at external factors that will change demand, one can see numerous factors that might have an impact. McDonald's food is notoriously unhealthy; therefore when people become more health conscious demand might decrease. Furthermore, when people become aware of ingredients; for example, McDonald's just stopped using its "pink slime" food additive in its hamburgers because of public concerns about the additive which probably had the potential to impact demand. Another factor that could impact demand is increased availability of substitute choices. For example, Subway, Wendy's and Taco Bell are relatively recent entrants into the breakfast food market, which has probably increased competition for breakfast, thus impacting demand for McDonald's breakfast products.

2. What are some things that would affect changes in supply?

Given that McDonald's produces food products, the biggest things that would impact the available supply would be changes in agricultural conditions. Mad cow disease, a potato famine, some type of chicken disease could all have a tremendous impact on McDonald's supply.

3. What if the government raised the minimum wage? How would this policy affect your firm?

If the government raised the minimum wage, that policy would have some impact on McDonald's, but probably not as much of an impact as some people would fear. McDonald's is an incredibly profitable organization and a minimum raise in wages really would not impact its financial bottom line in a significant manner. Imagine a dollar per hour increase in minimum wage and that the average McDonald's is staffed with 10 employees during prime hours; this means that the business owner must spend an additional $10 per hour. The goal is customer service within 90 seconds, so they expect to service 45 customers per hour.