In 2016, Netflix increased prices for their U.S. subscribers from $7.99 to $9.99 per month.1 Following the price increase, the rate of subscription growth decreased significantly, from 1.56 (in the fourth quarter of 2015, before implementing the price increase) to 0.40 (in the third quarter of 2016, after implementing the price increase). In addition, the stock price of the company fell by about 16% (price dropped in July 2016, after releasing the second quarter earnings, to $85.84 per share, from $102.23 on March 31, 2016). How much is the price elasticity of demand for Netflix subscription in this case, using the midpoint method when calculating the percentage change.
In 2016, Netflix increased prices for their U.S. subscribers from $7.99 to $9.99 per month.1 Following the price increase, the rate of subscription growth decreased significantly, from 1.56 (in the fourth quarter of 2015, before implementing the price increase) to 0.40 (in the third quarter of 2016, after implementing the price increase). In addition, the stock price of the company fell by about 16% (price dropped in July 2016, after releasing the second quarter earnings, to $85.84 per share, from $102.23 on March 31, 2016). How much is the price elasticity of demand for Netflix subscription in this case, using the midpoint method when calculating the percentage change.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
In 2016, Netflix increased prices for their U.S. subscribers from $7.99 to $9.99 per month.1
Following the price increase, the rate of subscription growth decreased significantly, from 1.56 (in the fourth quarter of 2015, before implementing the price increase) to 0.40 (in the third
quarter of 2016, after implementing the price increase). In addition, the stock price of the
company fell by about 16% (price dropped in July 2016, after releasing the second quarter
earnings, to $85.84 per share, from $102.23 on March 31, 2016). How much is the price
calculating the percentage change.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education