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Economics: A Study of the Spotify Case Study

   

Added on  2020-12-30

11 Pages3046 Words261 Views
Economics

Table of ContentsINTRODUCTION...........................................................................................................................1PART A...........................................................................................................................................1Question 1....................................................................................................................................1Question 2....................................................................................................................................3Question 3....................................................................................................................................4PART B............................................................................................................................................5Question 4....................................................................................................................................5PART C............................................................................................................................................7Question 5....................................................................................................................................7CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9

INTRODUCTIONEconomics is study which deals with the economies micro and macro factors. Economicsevaluates the problems of the economy and also the functions of economy through the use ofnumerical, graphs and examples. The report will study, the case study of the company Spotify which deals with providingonline subscription of music in the world. The report will include the demand drivers of Spotify.Also the supply side factors responsible for success of company in Latin America. The reportalso includes the cross-price elasticity of demand and effect of increase in price for Apple onSpotify subscription. It also includes the effect of boycott of top singers from Spotify.Furthermore, report includes the case study of Adidas which includes the the affect onequilibrium of the company by advertising through celebrities endorsements. And there effect onmacroeconomic risks.Thereafter, report will include the Consumption and GDP of US. Also the report willinclude the connection between consumption and GDP. The report will study the benefits toSpotify and Adidas with the increase in GDP and Consumption by the people in the economy.PART AQuestion 1A) The drivers of demand for Spotify subscriptions.Spotify is music streaming service which was originally developed in 2006 in Sweden.The company settled in Latin America before it settled in Brazil. The companies basic demanddrivers were the young age people which was below 30 years of age. While in Latin Americahalf of the people is below 30 years. This structure of the population in Latin America demandedthe music in the country increasing its demand. Spotify core audience were the middle classpeople and also Latin market mainly supports radio-driven technology which supported thedemand of Spotify through playlists and suggested songs. According to the theory of demand, the demand for any goods and services is the need ofthose products by their customers for a given consideration to the seller. Spotify fulfills thedemand of music through the streaming of new involved artists and reviewed playlist (Sahlins,2017). The main drivers of the demand of Spotify is its popularity itself and the music availablesuited to the young age group of people. Young people consist of half of the population in Latin1

America which increases the demand of music in the country thereby increasing demand for theSpotify.B) Supply side factors are responsible for recent success of Spotify in Latin America.Spotify operates a revenue model which includes providing of free trails of musicstreaming in their mobiles or desktops via web browsers and mobile apps. Initially Spotifyprovided the unlimited free music option thereafter the company puts an limit of music streamingof 10 hours a day after the unlimited music streaming for 6 months. The company thus increasedthe subscribers by unlimited music which is a marketing strategy to increase the demand andsupply of music streaming. Spotify keep evaluating its supply policies and ensure that there isgain of the music subscribers in each countries where Spotify operates (Pigou, 2017).According to the supply theory, the supply of a commodity and services refers to theselling of the products and services at specified price. In the normal cases the supply of thecommodity increases when there is increase in the price of commodities. Spotify kept the pricesame for the customers but earned more because there were increase in the customers of thecompany at same price level, resulted in the increased earning for Spotify. There were additionof the 20 million subscribers despite being the same price level. This increase in the supply is themarketing and revenue plans opted by the company. C) Cross-price elasticity of demand. Increase in the price for apple music subscriptions affectSpotify.Cross price elasticity of demand refers to the increase or decrease of the demand of acommodity with the change in the price of related goods. The price of the related goods result inthe change in demand for the commodity as the customers shifts to use of those goods whichhave lesser price. If the price of a commodity increase in case of substitute goods than thedemand for the elated goods will increase as the customers will shift to the substitute goodswhich have lesser price (Cooter and Ulen, 2016). On the other hand if the price of thecommodity reduces than the demand for the related goods will decrease. In case ofcomplementary goods there exist inverse relationship which implies that with the rise in price ofa commodity there is decrease in the price of complementary goods. For example- if the price of coffee increases, the quantity demanded for tea (substituteproduct) will increase. And on the other hand with the decrease in the price of coffee willdecrease the demand for tea by customers.2

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