The 7-inch tablet is the new 10-inch tablet. Consumers have stopped wanting the best instead opting for the cheapest, which explains why the Nexus 7 and iPad Mini are so popular. It would seems that Microsoft is finally catching on.

The Wall Street Journal reports that Microsoft is now in the planning stages of a 7-inch Surface tablet. The interesting part is that a 7-inch tablet wasn’t initially part of Microsoft’s Surface strategy, but the popularity of smaller tablets have reportedly forced the company to reconsider.

Microsoft already hinted that it was working on a 7-inch tablet last month when its newly updated OEM guidelines said that Windows 8 now supported a minimum resolution of 1024×768. The resolution is perfect for cheap 7-inch tablets. At the time, Microsoft said the new resolution rules were for “partners exploring designs for certain markets,” but it seemed pretty obvious that Microsoft would be making a 7-inch Surface tablet of its own.

A smaller, cheaper tablet could be just what Microsoft needs as Windows 8, and Surface tablets, have failed to capture much of the mobile market. Most of the problems stem from the high cost of Surface tablets with the Surface RT starting at $499. A 7-inch Surface could probably come in under $300, which would allow Microsoft to undermine the price of the popular iPad Mini. If Microsoft was truly crazy, it could even price it below the Nexus 7 at $200. Such a scenario is highly unlikely though.

All of this is just a rumor for now, but I wouldn’t be surprised to see it become reality sooner than later. It only makes sense for Microsoft to build a 7-inch Surface, and its own efforts may lead other OEMs to create cheaper 7-inch Windows tablets to help Windows 8 gain a little more marketshare.