Fast Food Industry's Market Structure (Essay Sample)

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Fast Food Industry’s Market Structure
The market structure of MacDonald’s is a monopolistic competition. It has characteristics of both a monopoly and a perfect market structure. For example, MacDonald’s is not a price taker. This is because it is revising its $1 menu, to increase prices without putting much consideration of what its competitors are charging. Some of its products will now sell at as more as $5. There is as well an element of product differentiation. In a monopolistic competition market structure, firms differentiate their products as a way of attracting and maintaining more customers. One of the key ways through which the company differentiates its products is by making them of high quality. It as well differentiates its products through unique packaging. Another tangible characteristic is the fact that there are a large number of buyers and sellers in this market structure (Sexton 359). Additionally, there is free entry in the market structure, which is as well a feature of a monopolistic competition structure.
It is true that the company is revising its $1 menu by raising prices. This is part of the company’s efforts to increase its revenue. It launched the $1 menu in 2002, and worked well until now when the general prices of goods have gone up (Wong). The company’s belief as far as the price elasticity of demand is concerned, is the fact that its products have an inelastic demand. This is because it is confident that it would not lose its substantial market even if it increases its prices. In other words, t...