Recent Question/Assignment

Netflix customers in Australia could soon be facing steeper monthly charges.
The popular streaming service on Monday confirmed that it recently tested higher subscription prices
for new customers in Australia. The company—which has nearly 100 million global subscribers and
expanded to Australia in 2015—has reportedly tested raising prices for new subscribers by as much
as three Australian dollars (AU).
Netflix’s test resulted in some Australian customers seeing price increases for the streaming service’s
Basic plan (going from AU$8.99 to AU$9.99 per month), while Netflix’s Standard plan increased AU$2
to AU$13.99 and the Premium plan increased AU$3 to AU$17.99 per month, according to The
Netflix confirmed the tests, but emphasized that it has not yet formally announced any permanent
price increases. “We continuously test new things at Netflix and these tests typically vary in length of
time,” the company said in a statement. “In this case, we are testing slightly different price points to
better understand how consumers value Netflix. Not everyone will see this test and we may not ever
offer it generally.”
Your task: Discuss why you think Netflix conducted this test and what you think they found from that
test based on their later decisions.
Refer in particular to concepts from the Week 3 lecture topic, such as what price elasticity of demand
is and how it is calculated and used, its relationship with revenue, and relevant determinants of price
elasticity of demand.