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Semester 2
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Coursework
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Module:
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Business Economics
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Module
Code:
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BBS_4_ECO
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Part A – Spotify
Spotify’s plan to beat Apple: sign the rest of the world
Questions:
1. Spotify has added over 20 million subscribers in the past year despite keeping its subscription prices the same. Spotify has now outpaced Apple in subscription growth.
a) What are the drivers of demand for Spotify subscriptions? Refer to the information in the article and link it to economic theory.
b) Which supply side factors are responsible for the recent success of Spotify in Latin America? Refer to the information in the article and link it to economic theory.
c) What is meant by the cross-price elasticity of demand? Explain both in words and with the use of a numerical example. How would an increase in the price for Apple music subscriptions affect Spotify?
2. Taylor Swift boycotted Spotify for three years from 2014 until 2017.
a) How does the refusal of top musicians to broadcast their music on Spotify affect Spotify’s ability to compete in the market for music streaming? Explain with reference to economic theory.
b) Taylor swift has recently stopped the boycott and agreed for her music to be streamed on Spotify. Draw a supply and demand diagram and show how this affects the equilibrium price and quantity of Spotify subscriptions. Explain also in words.
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