1. Using your understanding of demand theory, develop a pricing strategy for Apple iPhones. As a comparison also develop a pricing strategy for the sale of music/songs on Apple iTunes.

1. Draw demand lines depicting the relative elasticities of demand for iPhones and music in iTunes.

1. Explain your reasoning behind the chosen elasticities in question 2.

1. For the most recent iPhone model the elasticity of demand has been calculated at the following prices:

400	-2.33
300	-1.1
200	-0.05

1. Interpret these elasticity values.
2. Use these elasticity values to explain why the total revenue line initially increases as quantity increases, has a relatively flat portion, and then turns around and decreases as quantity increases further?

1. How would you go about estimating the consumer surplus generated by a price of 300.

1. Consumer surplus can be associated with each of the following issues: Explain all: (i) image, (ii) lost profits, (iii) opportunity, (iv) threat.

1. Explain the tactics used by Apple to extract consumer surplus - that is turn the consumer surplus into revenue.

1. What is the product life cycle and how do Apple exploit it?