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:

A) Demand for items on McDonald's menu is inelastic.

B) Value meals are an inferior good.

C) Demand for items on McDonald's menu is elastic.

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

E) Value meals are a "Giffen" good.