# Eco 561 Business Proposal for Mcdonalds

Topics: Economics, Microeconomics, Marginal concepts Pages: 4 (1236 words) Published: June 15, 2013

ECO/561
February 3, 2012

McDonalds has always been a company that shares in the happiness of a child. Recently after taking my own children to McDonalds, I have found that there is not a breakfast option for children. McDonalds should add a happy meal option to the breakfast menu. Current demands by consumers are to add a happy meal option allowing parents to purchase child sized portions of breakfast items. This option could help McDonalds to increase profits by attracting more consumers. Shareholder reports show a quarterly cash dividend per share increase of 15% and annual dividend of \$2.80 per share. Comparable sales grew 5.6%. Cash by operations increased \$808 million to \$7.2 billion. Return to shareholders \$6.0 billion (McDonald’s.com, 2012). Elasticity of demand and the market structure for the company’s good or service. * Profit-maximizing quantity is figured by determining the elasticity of the product. * By dividing the change in quantity sold by the corresponding change in price, you get a coefficient that tells you how elastic or inelastic your product is – with coefficients between zero and one being inelastic and coefficients greater than one being elastic. * The elasticity of this particular product is determined by the individual instead of the population. Considering this fact, fast food is considered an elastic good. An elastic good is more of a luxury, and fast-food is not a requirement to survive. * An elastic good, the price must be set at a reasonably low level to increase the revenue. * McDonalds can use the formula of marginal cost = marginal revenue to determine its pricing. Demand is elastic when it is easily affected by the raising or lowering in the price of a product or service. * When McDonalds raises its prices, sales will decrease. Decreasing prices, McDonalds will see an increase in sales. * McDonalds has such a competitive...

References: eHow.com, (2013). How to Calculate the Profit-Maximizing Quantity. Retrieved from: http://www.ehow.com/how_6713701_calculateprofit_maximizing_quantity.html#ixzz2LBfAZwYM.
McConnell, C., Brue, S., & Flynn, S. (2009). Microeconomics of Product Markets. In Economics: Principles, Problems, and Policies (18th ed.). New York: McGraw Hill/Irwin.