Case Description From the time Apple launched iTunes in mid-2003 through early 2009, it charged $0.99 for each song on its U.S. site. Despite having so over nine billion songs by early 2009, Apple was under pressure from many sides to change the price. Music producers wanted Apple to charge more. Should iTunes raise or lower its price? We know that in 2009, Apple changed to a new U.S. pricing scheme: $0.69 for a song from the older catalog, $0.99 for most new songs, and $1.29 for the most popular tracks. Discuss fully the economic analysis that likely supported this business decision. • Be sure to include clear linkage to economic concepts (for example, elasticity) in your discussion Some questions to consider: Categories of Song: How did managers likely determine which categories of songs should have lower or higher prices? Production Costs: Does Apple's marginal cost of production change when they sell more songs? Predicted Revenue and Profit: How could managers have predicted if the price changes would raise revenue and profit? Discuss both revenue and profit – they are not equivalent concept Luillupuete Thepk You

Case Description From the time Apple launched iTunes in mid-2003 through early 2009, it charged $0.99 for each song on its U.S. site. Despite having so over nine billion songs by early 2009, Apple was under pressure from many sides to change the price. Music producers wanted Apple to charge more. Should iTunes raise or lower its price? We know that in 2009, Apple changed to a new U.S. pricing scheme: $0.69 for a song from the older catalog, $0.99 for most new songs, and $1.29 for the most popular tracks. Discuss fully the economic analysis that likely supported this business decision. • Be sure to include clear linkage to economic concepts (for example, elasticity) in your discussion Some questions to consider: Categories of Song: How did managers likely determine which categories of songs should have lower or higher prices? Production Costs: Does Apple's marginal cost of production change when they sell more songs? Predicted Revenue and Profit: How could managers have predicted if the price changes would raise revenue and profit? Discuss both revenue and profit – they are not equivalent concept Luillupuete Thepk You

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter10: Prices, Output, And Strategy: Pure And Monopolistic Competition

Section: Chapter Questions

Problem 2.2CE

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