McDonald’s in Haight-Ashbury

Posted by: Evangel on: September 15, 2010

• In: Articles | Section 2: Microeconomics
• 1 Comment

McDonald's logo (Photo by Getty Images)

Demand is defined as that quantity of a good or service that would be bought at each and every price over a period of time. This means that demand combines: (1) the desire for a product, (2) a willingness to pay for it, (3) the ability to pay for it. The law of demand states: assuming that consumers act in a rational manner and other things being equal, the lower the price of a good, the greater the quantity demanded and the higher the price, the less the quantity demanded.

Prevalent in 118 countries, McDonald’s has taken over the world. The cheap price and tasty fast food has been attracting thousands of people daily. However, according to the articleccording to the article, “Hassle in Haight over McDonald’s menu change” in San Francisco Chronicles, McDonald’s in Haight-Ashbury, a neighborhood of San Francisco, decided to eliminate the Dollar Menu. The elimination of the Dollar Menu lead to rise in price of McDonald’s menu. Because of this rise in price, homeless people could not afford McDonald’s anymore. Thus, the demand of McDonald’s in Haight-Ashbury decreased in few months.

The Demand Curve below (Figure 1) clearly illustrates the situation of McDonald’s in Haight-Ashbury.

(Figure 1) Demand Curve of McDonald's in Haight-Ashbury after the rise of price

Consider that McDonald’s in Haight-Ashbury before eliminating the Dollar Menu as point X. Since the price of the fast food was low (as shown as P₁), many people demanded McDonald’s (as shown as Q₁). However, after McDonald’s decided to get rid of the Dollar Menu (as shown as point Y), the price of fast food rose from P₁ to P₂. Accordingly, the demand decreased from Q₁ to Q₂, for the homeless could not afford more expensive food.

As seen in Figure 1, as the price of McDonald’s food rose, the quantity demanded decreased, ceteris paribus; the point X moved along the demand curve to point Y.

Tags: Curve, Demand, Dollar, Haight-Ashbury, Law of Demand, Markets, McDonald's, Menu, Price, Rise, San Francisco, Shift, United States