Netflix is a service that participates in a perfectly competitive market. The graph below shows how price and quantity is set based on the dynamics of both the demand and supply. Because Netflix is a part of a perfectly competitive market they are price takers, not price makers. Competition with Hulu, HBO Go, Amazon Prime, and Vudu prevents Netflix from maintaining a monopolistic hold of the streaming market and therefore prevents it from setting its own price.
Price increases for potentially elastic and non-essential products and services are risky. However, to increase their business a price rise may be necessary.
Price increases for potentially elastic and non-essential products and services are risky. However, to increase their business a price rise may be necessary.
As we have learned the dynamics of microeconomics supply and demand have key elements that stretch across most merchandising districts. In the setting of a price and quantity it is important to understand both consumer demand and supplier needs. At this point in time Netflix is feeling the pressure of certain expenditures which suggests a need price increase, however without a higher level of demand or a low level of elasticity the supply/demand graph will be thrown off.