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
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text: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 sold
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
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