Of course it’s determined by supply and demand, but as the price goes up (and it almost has to if cost goes up), demand goes down. Or, in other words raising the price doesn’t affect actual demand, but does affect the number of sales.
You said it yourself: why do you think McDonalds doesnt charge 1.50 a burger instead of $1. Do you think its because they dont think that 1.50 is a fair price since given the cost of meat, labor etc say it comes out to 50 cents a burger and they only deserve 50 cents profit?