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Product, Services, and Prices in the Free Market Economy The impairment changes of goods in the market impact the supply needed and profits earned of companies. Companies that record the concepts of price elasticity, including the concepts of the theory of affect and supply are more(prenominal) likely to determine the equilibrium price that maximizes supply and beseech and devise pricing strategies accordingly to maximize profits. Marketline (n.d.) maintains McDonalds Corporation, formed in 1955, is a fast food chain offering a variety of foods including the Big Mac, which was introduced in 1968 and became one of the most fashionable foods in the world. As profits have diminished oer time, McDonalds tried implementing a strategy based on their hope that the demand for Big Macs was elastic. In 1997, McDonalds, …under the allowers of chairman and chief executive Michael Quinlan, is opting for a time-tested evasive action: cut your price, tempt more customers into the store and let your rivals sudate (South China Morning Post, 1997). Economists measure the changes in price of goods and the demand for the products so that they can interpret the market for the goods and the consumer reaction to price changes. Additionally as consumers income changes, this affects their decision on acquire certain goods and not others.

In order to maximize profits, which McDonalds has wise to(p) to do since it had revenue of $22,786.6 billion in 1997 according to Marketline (n.d.) it has to understand where to set prices on its products. Additionally, McDonalds needs to understand the effect or change in consumer purchasing as prices for products are increase or decreased. According to McConnel and Brue (2004) price elasticity of demand is a measure of The responsiveness (or sensitivity) of consumers to a price change. The article continues to state that price changes are relatively elastic if moderate increases lead customers to change the quantity purchased. If the quantity purchased... If you want to get a full essay, order it on our website: Orderessay

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