Key Concepts: The Price Elasticity of Demand, The Use of Price Elasticity of Demand, Determinants of the Price Elasticity of Demand, Other Demand Elasticities, Supply Elasticities

U.S. Department of Justice - Microsoft Case Exhibit
http://www.usdoj.gov/atr/cases/exhibits/55.pdf

Review the first section of 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).Highlight the last sentence of the referenced email message (e.g. …we will test the price elasticity further…).

• 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" then should Microsoft consider increasing the proposed upgrade price? Why?
• Survey the current Microsoft Office XP Suite retail-pricing schedule at http://www.microsoft.com/windowsxp/howtobuy/default.asp Explain why Microsoft offers different pricing options (e.g. price discriminate) on their XP Suite.