Netflix is the largest online DVD rental service offering flat rate online streaming to customers in the United States. Currently, there are approximately 8 million subscribers. Suppose Netflix decreases its flat rate rental by 10 percent and an additional 1 million people subscribe. This information means that Netflix's demand is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.

Question

Quizplus · Accepted Answer

If the decrease in price leads to a significant increase in the number of subscribers, it indicates that the demand for Netflix is quite sensitive to changes in price, making it elastic. Additionally, the fact that 1 million new subscribers joined after the price decrease further suggests that the price cut had a considerable impact on demand.

Netflix Is the Largest Online DVD Rental Service Offering Flat