Evaluating Economic Problems: Demand and Supply of McDonald's Big Mac

This report examines the economic challenges McDonald's faces in selling its Big Mac, focusing on demand-side and supply-side factors in the UK market. On the demand side, changing consumer tastes and preferences, particularly a shift away from high-calorie, preservative-laden foods, have reduced demand. Additionally, issues with customer service have further diminished consumer interest. On the supply side, rising input costs, such as cheese and vegetables, due to inflation have increased the cost of production, leading to a decreased supply. Given the elastic demand for Big Macs due to competition, price increases result in a proportionately larger decrease in quantity demanded, undermining profitability. The report includes figures illustrating shifts in both demand and supply curves and references relevant microeconomic principles.

ECONOMICS ASSIGNMENT
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Contents
The economic problem of selling the product of McDonald: Big Mac.....................................3
Demand-side..............................................................................................................................3
Supply-side.................................................................................................................................4
Reference....................................................................................................................................5
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The economic problem of selling the product of McDonald: Big Mac
Demand-side
The economic problem that has reduced the profitability of the McDonald in the UK is the
demand side. The tastes and the preferences of the customers of UK are changing which has
impacted in the profitability of McDonald in the UK (Friedman, 2017). Big Mac is one of the
popular food products of McDonald that has seen a huge demand. This high-calorie burger
uses cheese, artificial preservatives and many other substances which are not healthy of the
consumers. Another economic problem being faced by the McDonald in the UK is the change
in the customer service that has deteriorated the interest of the consumers. Improper
behaviour and delay in delivering Big Mac has been a common scene in UK. These two has
shifted the demand curve to the left and price level has reduced along with the outcome.
Figure 1: The demand curve shifts to the left side
(Source: Friedman, 2017)
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Supply side
The profitability of the company has also reduced due to the changes in the supply of the UK
market side as well. Big Mac uses high-quality cheese, vegetables, and buns collected from
the domestic market of UK. These are the variable cost of producing one unit of a burger by
the company. Now, the prices of these inputs have increased due to the inflation rate.
McDonald can now supply a smaller number of burgers at a given cost. The changed supply
curve and the unchanged demand curve have shown equilibrium with a higher price level and
lower output (Cowell, 2018). Now it needs to be noted that demand for Big Mac burger of
McDonald has an elastic demand due to the presence of other food products and burgers of
other companies such as Burger King in the UK market. Further increase in price has reduced
the quantity demanded proportionately more and hence the revenue has decreased. Therefore,
given the same cost, the profitability of McDonald has been undermined.
Figure 2: a shift in the supply curve
(Source: Cowell, 2018)
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Reference
Cowell, F., 2018. Microeconomics: principles and analysis. Oxford University Press.
Friedman, L.S., 2017. The microeconomics of public policy analysis. Princeton University
Press.
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