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BUS 1103 Economics for Managers and BUS 1203 Software Applications for Business

Higher Collage of Technology BUS 1103 Economics for Managers and BUS 1203 Software Applications for Business McDonald Group 3 Fatima Mohammed Hamdan H00235092 Halawa Saeed Ali Erwaished Al Shehhi H00224578 Shaikha Ahmed Al Mehrezi H00225485 Aaesha Waleed Al Nuaimi H00227857 14/10/2012

Table of Contents Introduction 2 Main Products & general characteristics of the firm 2 a. Analysis of the firm’s supply and demand: 4 Prices of competing products/services: 5 Number of consumers: 7 Technology: 8 Number of competitors: 9 Costs of production: 9 Indicate one other non-price determinant 10 1. Analysis of the Price Elasticity of Demand for one of the products. 12 Bibliography 13

Introduction

Main Products & general characteristics of the firm

a. Give brief background information about the business, including, total revenue/sales and the location of its headquarters.

About many years ago this restaurant was established in 1954, by a man named Ray Kroc. It was one small restaurant in California but many years later it became bigger and bigger and they have more than 33,000 restaurants serving nearly 68 million people in more than 119 countries every day. (McDonald's, Our Story, 2010-212). The address for McDonald's corporate headquarters is: McDonald’s Corporation, 2111 McDonald's Dr, Oak Brook, IL 60523. (G, 2008). We visited its branch on Al Dhait at Al safer mall and they say that our total revenue was 600000. (Employee, 2012)

b. Identify three important products / services that this business sells. Describe the products. Research how the prices of these three products/services have changed in the last two years. List these prices and, the amounts sold (estimate, if actual amounts are not available.) Create an Excel worksheet as shown below. Worksheet instructions will be given in BUS 1203 Software.

Chicken McNuggets introduced in 1980 contain potatoes, juice (Pepsi or Coke…etc.), and chicken nuggets with dipping sauces. Moreover, at that year they added more sauces. (Wikipedia, 2012) In 2011 it is price is 17 PED. (Employee, 2012)

Big Mac is another item from McDonald and it is a double layer of meat or beef with sauce and American cheese, crisp lettuce, minced onions and tangy pickles with juice (customers can choose the juice they want whether it is Pepsi or coke…etc.) and potato. (McDonald's, There is only one, 2010-2012) In 2011 it is price became 17 PED. (Employee, 2012)

Another item from McDonald is Happy Meal. This good was produced from Burger Chef's Funmeal concept of a children's meal and it was in 1979. They bring a box contains potato, juice (customers can choose the juice they want) and burger (beef or chicken) and it is inside bread. Furthermore, cheese, mayonnaise and lettuce were added. Happy Meal is less than the adult meal and contains a toy (customers can choose the toy they want). (Wikipedia, 2012). Happy Meal is for 11 PED. (Employee, 2012)

See Excel file for the table. ( Change in Price in 2 years).

c. Discuss two opportunity costs your firm needs to consider in its business decisions. Opportunity cost is something that you leave because of scarcity and you do something else. One of the opportunity costs they choose to sell more beef than chicken because of the taste. The other opportunity cost they face is to sell rice.

d. Describe one scarcity issue your firm has to deal with on a regular basis. How do they deal with the issue?

Scarcity means we have limited resources but unlimited wants to fulfill

They face scarcity on lack of manpower, so they deal with the issue by increasing the price of their products. (Employee, 2012)

0. Analysis of the firm’s supply and demand: Consumers’ income:

As income increases, demand increases. There are two types of goods which are normal goods and inferior goods. Normal good: a good for which the demand increases as income rises and decreases as income falls (happy meal (burger)). While, products which are increasing as income falls, and vice versa, are inferior goods, so burger is an inferior good. (Hubbard,G,.O’brien,A,.Eid,A,.El Anshasy,A, 2011). In the chart Y-axis shows the price and X-axis shows the quantity demand. An increase in income, demand will shift to the left because it is an inferior good. (Hubbard,G,.O’brien,A,.Eid,A,.El Anshasy,A, 2011). The graph shows that supply curve unchanged and demand curve shift to the left that led a decreases in equilibrium quantity and equilibrium price (here we talk about consumers perspective able and willing to buy).

D0

D1

Price

Quantity

S0

11

45000

10

29000

Consumers’ income

Prices of competing products/services:

There are two types of related goods. Substitute’s products that can be used for the same purpose (Happy meal and Chicken McNuggets). Substitute and demand are inversely proportional. Furthermore, complements products that are used together (Pepsi and burger). Complements and demand are directly proportional. (Heweidy, 2012). The graph shows two lines one is vertical and the other one is horizontal. They called X-axis and Y-axis. Y-axis shows the price of the good (Happy meal). While, X-axis shows the quantity of the product will sell. Moreover, there are three curves two of them show demand the other one shows supply. Besides that, demand number zero has shift to the right because consumers buy less of the substitute good (KFC) and more of this good (McDonald) and that happened with an increase of the price of substitute or any other factors. We have another thing which complementary good it’s also will affect the demand. And also, the equilibrium price and equilibrium quantity for both demand and supply were increased.

Price

Quantity

S0

D0

10

29000

D1

45000

11

Prices of competing products

Number of consumers:

Population and demographics are two ways to describe number of consumers. Population is the number of people who live in a certain area. More population means increased demand. Demographics are the characteristics of a population with respect to age, race, and gender…etc. (Heweidy, 2012). This affects demand for certain products according to the type of demographic. (Younger means increases in demand for McDonalds (More children, more happy meals will be sold)). When more population or younger increases (demographic) demand shifts to the right and both equilibrium price and quantity will increase.

Price

Quantity

S0

D0

10

29000

D1

45000

11

Number of consumers

Technology:

Technological change is a positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs. If technology is applied correctly, supply increases (shift to the right). (Heweidy, 2012). For example if workers and machines used correctly, supply curve will shift to the right. (Hubbard,G,.O’brien,A,.Eid,A,.El Anshasy,A, 2011). The equilibrium price was from 10 PED in 2009 to 11 PED in 2011 which means eliminating previous equilibrium price by decreasing it. While, equilibrium quantity eliminated by increasing from 29000 Happy Meal in 2009 to 45000 Happy Meal in 2011 which means increased in equilibrium quantity.

Price (PED)

Quantity (Happy Meal)

S0

D0

11

29000

S1

45000

10

Technology

Number of competitors:

When number of firms that sell a certain product increase, supply increases, and vice versa. (Heweidy, 2012) The competitors for McDonalds are KFC, Burger King, Texas Chicken, Southern Fried Chicken and Hardee’s...etc. Here we have to talk about firms perspective (able and willing to sell at every price), so when new firm enter the supply curve will shift to the right, and vice versa. (Hubbard,G,.O’brien,A,.Eid,A,.El Anshasy,A, 2011). Lead equilibrium price to decrease and equilibrium quantity to increase.

Price

Quantity

S0

D0

11

29000

S1

10

45000

Number of competitors

Costs of production:

When prices of substitutes increase, supply increases and vice versa. (Heweidy, 2012). Firms often choose which product to produce. (Hubbard,G,.O’brien,A,.Eid,A,.El Anshasy,A, 2011). Big Mac and Chicken McNuggets are called substitutes in production. Moreover, if the price of Happy Meal increases, Happy Meal will be more profitable and the company will shift some of their productive capacity away from Chicken McNuggets and toward Happy Meal. McDonald will offer fewer Chicken McNuggets for sale at every price, so the supply curve for Chicken McNuggets will shift to the left. Y-axis shows the price. While, X-axis shows the quantity of Happy Meal sold. The graph shows decreases in equilibrium quantity and increase in equilibrium price.

Price

Quantity

S0

D0

10

45000

S1

29000

11

Costs of production

Indicate one other non-price determinant

(Expected Future Prices) When these increase, supply falls (because suppliers wait until prices rise to make more profit) and vice versa. (Hubbard,G,.O’brien,A,.Eid,A,.El Anshasy,A, 2011). The diagram shows two lines one is a horizontal line which is the quantity for both demand and supply and vertical line which is the price. S0 and S1 show supply curve and D0 shows demand curve. If firms are expected future price of t