Microsoft offers Office 365 Education at no charge to educators and students at eligible institutions. Explain how this free service affects the own-price elasticity of demand for Office 365 when the students graduate.
A) Reduces the elasticity.
B) Increases the elasticity.
C) Does not affect the elasticity.
D) None of the above.

Question

Quizplus · Accepted Answer

Offering Office 365 Education for free to students and educators can reduce the own-price elasticity of demand for Office 365 among these users once they graduate. This is because they become accustomed to using Microsoft's software suite during their education, potentially leading to a preference for these tools in their professional lives. As a result, they might be less sensitive to price changes and more likely to continue using Office 365 even if the price increases, thus reducing the elasticity.

Microsoft Offers Office 365 Education at No Charge to Educators