In January 2019, the online entertainment service, Netflix, raised the U.S. price of its Basic plan by US$1 to US$8.99 per month, and the prices of its Standard and Premium plans by US$2 to US$12.99 and US$15.99 per month respectively. Meanwhile, Netflix added new TV shows and films, including original productions for international audiences. Despite the price increases, subscribers grew by 20% and revenue by 28% to US$20.2 billion.
a. If Netflix had not added content, how would the 2019 price increases have affected subscriptions?
b. How did Covid-19 lockdowns affect the demand for Netflix subscriptions?
c. In October 2020, Netflix increased the U.S. prices of the Standard and Premium plans by US$1 and US$2 respectively. Market analysts disagreed on whether earnings would fall or increase. How would the effect depend on the own-price elasticity of demand?
d. How would mass vaccinations against Covid-19 affect the demand for Netflix subscriptions?

Answer rating: 100% (QA)

a There exists an inverse relationship between price and quantity demanded An increase in price leads to a decrease in quantity demanded whereas a decrease in price leads to an increase in quantity de... View the full answer