Last spring, TUAW asked how much you would pay for iPhone software. Well, it looks like $0.99 and $1.99 are the new $39.99 and $49.99 as far as mobile distribution goes. The App Store bucked the trend of high-priced phone software and now is ratcheting those prices down even further.

Developers are responding to high application supply and dwindling demand by lowering their prices across the board. As the App Store novelty wears off and consumers forget about once-"hot" items, the typical price tag continues dropping. Games that cost $9.99 at launch are almost universally $4.99 and less.

Apps like Koi Pond proved that $0.99 can generate a lot of sales. Short term sales are quickly being eclipsed by long term price drops. We typically get our tips about upcoming price changes directly from developers; 148Apps has introduced a automated price drop detector.

As the App Store continues to evolve from "get rich quick" to make money slowly, devs are working to find that sweet spot -- charging enough to earn a living but not so much that they aren't out-competed.

Based on these downward pricing trends, I expect ad-supported apps to really start taking off soon, the way they are doing in the jailbreak world. If developers can't build their revenue stream from charging higher prices, they may turn to alternative monetizing models instead.

What does it mean when a 16GB 3G iPhone costs about the same as an 8GB iPod touch? Is it the AT&T kickback economics finally coming into reality? Or are we going to see an iPod touch price drop sometime soon? Face it. The iPhone is just a better device than the iPod touch. And if you can get one cheaper? Why not. It has a built-in speaker and microphone too, assuming you can get past that activation screen.

So if you have the choice between buying one or the other, the iPhone is a really sweet alternative. And if the iPod touch comes down in price? Even better.

How much is an iTunes download worth? About 70 cents, if conventional wisdom is correct. That's the commonly quoted number for the iTunes money that gets passed back to the record labels. And according to the New York Times today, the record labels are angling for more. They argue that broadband music sales through the mobile iTunes store somehow should bring them a greater profit than sales through the standard iTS, pointing to industry practice for ringtone and ringback sales.

I don't quite understand their reasoning. I think most phone-based ringtone sales are outrageously overpriced. Increased sales volumes will benefit the labels even at the current wholesale prices. Ah well, another example of Underwear Gnome economics in action.

For years, The Economist has monitored the "Big Mac Index" to measure the relative purchasing power of various currencies; it's not an exact measurement but it's an interesting (and moderately nutritious) one. Now, as noted by Marginal Revolution, Australia's Commonwealth Bank has extended the idea by measuring the Nano Index: comparing, you guessed it, the relative price of an iPod Nano in 26 countries.

The results are far-ranging, and obviously subject to Apple's local pricing policies in addition to government and trade restrictions. Worst places to shop for a Nano: Brazil is by far the most expensive at $327.71, way more than 2nd through 5th places India, Sweden, Denmark and Belgium (all under $225). US shoppers have a pretty good deal at the list price of $149, with only Japan, Canada and Hong Kong slightly cheaper. See the MR post as well as the Yahoo News story for more analysis of the macroeconomic implications of the tiny MP3 player's price tag.

It's amazing that in only five years the iPod has achieved enough global brand status to allow "indexing" alongside the Big Mac, Coca-Cola and a Starbucks latte.

Update: Headline corrected to "Nano."