Read the excerpt below and answer the questions that follow: Shifting Consumer Tastes Change Fast-Food Industry --------------------------------------------------- Fast-food giants are facing demanding customers who want healthful food that can be tailored to individual tastes. These days they want something more than just hamburgers and French fries. In the industry's infancy though, that alone was the perfect combination. ---------------------------------------------------------------------------------------- Fast food got its start on historic Route 66 in San Bernardino, California, where the McDonald brothers opened a restaurant in 1940. That would later streamline their operation to focus on burgers and fries, sold at a high volume and for a low price. A business acquaintance named Ray Kroc helped them expand their franchise and later bought them out, and he created a worldwide empire.

Different Appeal ---------------- Young people are likely to hang out at other restaurants today, like Chipotle. The growing Mexican-food chain advertises its healthful ingredients. A Chipotle outlet in Washington draws customers like Yao Odamtten. "I just eat healthy and I like health and wellness. It's very important to me," he said. Chipotle is part of a new segment of "fast-casual" restaurants, said industry analyst Shon Hiatt of the University of Southern California.

What makes restaurants like Chipotle, Panera and Noodles & Company different from fast food "is that the food is tailored, and it can be customised," he said. "It's still quick, and also has this perception of being much higher quality." Hiatt said these new chains cater to millenials, young people who became adults around the year 2000. "Recent statistics over the last four years have shown that millenials, on average, have been increasing their consumption of fast casual by 5 percent annually, whereas their consumption of fast food has remained largely flat, " he said. Falling Profits, Image Trouble McDonald's is facing falling profits and is coping with fallout of news last year that its Chinese supplier had provided the company with expired meat. McDonald's has diversified its menu to include more healthful items. It is also exploring automation to make its food more customizable. And in the face of worker demands for higher wages, the company may use automation to reduce its labour costs. Industry analysts say the fast-food giants need to innovate to keep pace with a changing business landscape and changing tastes. https://www.voanews.com/a/shifting-consumer-tastes-change-fast-food-industry/2814926.html Accessed on 15 August 2018

1.1 Discuss the main factor affecting demand. Substantiate your answer by using a diagram to illustrate your answer. (9)

1.2 Discuss the pricing strategy that McDonald's used in its infancy stage. Include in your answer an explanation of why this would be the case. (6)

1.3 The article states that "McDonald's is facing falling profits..." Explain how this relates to the long-run average cost curve. Motivate your answer with the aid of a diagram. (10)