Question $3$

$(20$ marks$)$

Netflix is a streaming service that offers a wide variety of award$-$winning TV shows, movies,

anime, documentaries, and more on thousands of internet$-$connected devices. You can

watch as much as you want, whenever you want without a single commercial $-$ all for one

low monthly price. There is always something new to discover and new TV shows and

movies are added every week.

Netflix is considering launching a new, innovative product onto the Namibian market and is

trying to decide on the right launch price for the product. The product's expected life is three

years. Given the high level of costs which have been incurred in developing the product,

Netflix wants to ensure that it sets its price at the right level and has therefore consulted a

market research company to help it do this. The research, which relates to similar but not

identical products launched by other companies, has revealed that at a price of $N$$$60,$

annual demand would be expected to be $250000$ units. However, for every N $$2$ increase in

selling price, demand would be expected to fall by $2000$ units and for every $N$$$2$ decrease in

selling price, demand would be expected to increase by $2000$ units.

A forecast of the annual production costs which would be incurred by Netflix in relation to the

new product are as follows: