Key Concepts: The Price of 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

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.