Food is inelastic because people have to consume food regardless of the price. However, the people have the right to choose what they want to consume. Logically they will target the cheaper food products. Recently, the Subway food chain will soon surpass the McDonald’s food chain of restaurants. Even though the McDonald’s budget passes Subway’s budget by billions of dollars, Subway is determine to open more locations. A strategy that McDonald’s utilizes is it has many locations internationally while Subway tries to open locations in places such as malls, stores, and gas stations to provide the option of food without crossing the street. McDonald reassures that in the long term of business it will still surpass Subway. On the hand, the popularity of Subway is growing we can start to see that consumer sovereignty is going towards healthier food options with lower prices, which represents competition for McDonald’s. Consumers are starting make better trade-offs such as buying a Subway sandwich over a 2,000 calorie meal at McDonald. Consumers will always look for their options to pursue their self-interest. McDonald and Subway must keep present that some consumers can make a decision due to the income effect and McDonald’s has a dollar menu, which is a disadvantage for Subway. Will Subway surpass McDonald’s profit in the future? Will Subway suffer economically and shut down locations giving McDonald’s the win?
By Abby Garcia