QUESTION 11

When it was considering introducing its "value meal" several years ago, McDonald's first tried this in a few selected cities in the United States. The introduction of these meals amounted to a price reduction of about 5% on average for all the items on its menu. The company then saw revenues go down at most stores. This suggests that, at the pre-value meal prices and quantities, at most stores:

Demand for items on McDonald's menu is inelastic.

Demand for items on McDonald's menu is elastic.

It is not possible to make inferences about own-price elasticity based on the information provided.

Value meals are a "Giffen" good.

Value meals are an inferior good.