Question: 1 in 2016 netflix allowed its prices to increase for...
1) In 2016 Netflix allowed its prices to increase for U.S. subscribers. Using the data on monthly revenue per paid member in the quarter before the price increase and at the end of the third quarter in 2016, calculate the percentage change. We will use it as a proxy for the percentage change in price.
2) Determine the average membership growth (net additions) before the price increase.
3) Using the projections in the previous question, assuming the growth rate would have stayed the same, how many subscribers Netflix may have expected to add in the 2nd and 3rd quarters of 2016 if it didn't allow the price to increase? How many subscribers did Netflix actually add in the 2nd and 3rd quarters of 2016? Comparting the two numbers how many subscribers were gained/lost due to price increase? What percentage change does it represent relative to the subscribership level in the quarter before the price change (use Total Memberships)?
4) Using the percenage changes in the price and subsriberships calculated in the previous questions, determine the own price elasticity of demand.
5) What do we expect to happen to Netflix's revenue due to the price increase?