1. Netflix is one of the largest subscription based online video demand service for households. Currently, there are approximately 214 million subscribers. Suppose Netflix increases its average flat rate (price) by 10 percent and its total revenue increases. Based on this information, what is the type of demand for Netflix subscriptions? Give reasons.

2. Sally quit her job as an auto mechanic earning $50,000 per year to start her own business. To save money she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year. She also invested her $20,000 savings (which earned a market interest rate of 5% per year) in her business. You are given the following information about the first year of her operations. [Show your work]

Total revenue $120,000

Cost of labor 40,000

Cost of materials 15,000

Equipment rental 5,000

1. Sally's economic cost of running her business.

2. Sally's accounting cost of running her business.