The Right Price for Digital Music Apple's $1.29-for-the-latest-songs model isn't perfect and isn't it too much to pay for music that appeals to just a few people? What we need is a system that will be profitable but yet fair to music lovers. The solution: Price song downloads according to demand. The more people who download a particular song, the higher will be the price of that song, the fewer people who buy a particular song, the lower will be the price of that song. That is a free-market solution--the market would determine the price. Source: Slate, December 5, 2005 The graph shows the market for downloadable music with a price of $1.29 for all the latest songs. Assume that the marginal social cost of downloading a song from the iTunes store is zero. (This assumption means that the cost of operating the iTunes Store doesn't change if people download more songs.) Draw the consumer surplus, the producer surplus, and the deadweight loss. Label the three shapes.
Price (cents per download) 280- 240- 2004 160- 129 120- 80- 40- S D 100 50 100 150 200 Quantity (downloads per hour) 250 >>> Draw only the objects specified in the question.
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