Elasticity and Microsoft

Read Bill Gates' speech at the Microsoft CEO summit...
a. In this speech, Bill Gates uses the term demand elasticity twice (dealing with computers and high speed data lines). Is he referring to price, income, or cross-price elasticity of demand?
b. Is he correct in arguing that revenue will increase when production costs fall (and supply increases) when demand is elastic? Explain.

U.S. Department of Justice - Microsoft Case Exhibit

Read the first paragraph of the February 24, 1997 email message from a senior Microsoft executive to Bill Gates that outlines the price elasticity issue of marketing the upgraded OS (Windows Operating System).

• Explain why Bill Gates might be interested in the price elasticity information on the proposed upgrade of Windows OS (operating system).
• If the OS elasticity measure is determined to be very inelastic, should Microsoft consider increasing the proposed upgrade price? Why or why not?
• Survey the current Microsoft Office XP Suite retail-pricing schedule. Explain why Microsoft offers eight different pricing options on their XP Suite.
  

Elasticity - Darnell Group

Read the Darnell Group's description of their custom consulting services.
a. Why would a firm be interested in knowing the price elasticity of demand for their products?
b. Why would a firm be interested in knowing the cross-price elasticity of demand for their products?
c. Why would a firm be interested in knowing the income elasticity of demand for their products?