Economics: Factors Affecting Spotify's Success in Latin America

Running head:ECONOMICS
Economics
Name of the student
Name of the university
Author note

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Table of Contents
Part A.........................................................................................................................................3
Answer 1....................................................................................................................................3
Answer a.................................................................................................................................3
Answer b................................................................................................................................3
Answer c.................................................................................................................................4
Answer 2....................................................................................................................................5
Answer a.................................................................................................................................5
Answer b................................................................................................................................5
Part B..........................................................................................................................................7
Answer 3....................................................................................................................................7
Answer a.................................................................................................................................7
Answer b................................................................................................................................7
Answer 4....................................................................................................................................8
Answer a.................................................................................................................................8
Answer b................................................................................................................................9
Part C........................................................................................................................................10
Answer 5..................................................................................................................................10
Answer a...............................................................................................................................10
Answer b..............................................................................................................................11
Answer c...............................................................................................................................12
Reference list............................................................................................................................13

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Part A
Answer 1
Answer a
Spotify have succeeded in Latin America because half the population of Latin
America is under 30. This states that the majority of the population is young who loves
music. Since the younger people are more hooked to social media, they are known to be the
core audience of Spotify (Iossa and Martimort 2015). The middle class population of Latin
America is also increasing where more people were now able to pay fees for the purpose of
environment. Rise in the young population in Latin America lead to the increase in demand
for Spotify. The Latin market is also found to be driven towards since they have the habit of
listening to radio.
Answer b
The easy licencing facilities acts as the supply drivers for Spotify in Latin America.
Morgan Staley predicts that the subscription of Spotify will be doubling in the next five years
and will reach to 200 million subscribers. It have been expected by the banks that by the year
2013, Spotify will be having more than 50 million paid subscribers in Asian market along
with Africa
The demand side factors which works for Spotify subscription is the large number of
radio listeners in Latin America who loves music. Huge number of young population act as
the main driver of Spotify who spends most of the time in the social media. The middle class
population is also growing the present years where they were also able to pay their fees for

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the entertainment purpose. The young population is also known to love music and spends
more time on social media.
Answer c
The cross price elasticity of demand will be showing the relationship between the
services or goods. The measure of the responsiveness of the goods demanded towards the
change in the price of related goods is termed as the cross price elasticity of demand (Jawad,
Glantz and Millett 2018). It is therefore measured by taking the change in percentage of the
quantity demanded for one good by dividing it by the percentage change in the price of good.
Example of the cross price elasticity of demand
Price of the product X rise from $5 to $10 forces the consumer to demand more of Y whose
demand now rise from 10gm to 20 per gram.
Cross Price Elasticity of Demand = % change in quantity demanded of product of A / %
change in price product of B % change in quantity demanded = (new demand- old demand) /
old demand) x 100 % change in price = (new price – old price) / old price) x 100
In his case, the value of the cross price elasticity is 1 which also states that X and Y are
substitute goods.
When there will be rise in the price of Apple, the demand for Spotify will increase as both
Apple and Spotify are the substitutes. For this reason, when Apple’s price will rise, more
people will be switching to Spotify.