QUESTION 1: Subway v/s Big Mac

When subway launched it started taking market share of McDonalds because its food is regarded

as fresh, healthy, on spot and made as per customer's taste and preference. In 2003, McDonalds

then replaced its traditional question "will you have fries with that" to "will you have an apple

with that" as a part of its major reorientation of the product to match its customer's preferences.

a) Explain why McDonalds has made this change? Refer to the conditions of demand of Big

Mac?

b) What combination of two graphs (McDonalds and Subway) would you use to illustrate the

above fast food situation? (movement along the curve or shift)

c) What factors were responsible for the changes in the fast food market?

d) What would happen if they didn't make any such changes?

e) According to you, how was the impact of this change in strategy of McDonalds?

QUESTION 2: In a burns-road food street, there is a youngest 12-year-old entrepreneur. His most recent venture

is selling homemade pasta that his mother makes. At price of Rs. 60 each he sells 100. At price 40

each he sells 300. Is this demand elastic or inelastic in this range, explain? If demand has the same

elasticity for the price decline from 60 - 40, would cutting the price from 40 to 20 will further

increase or decrease his total revenue.