QUESTION

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 companywhich has nearly 100

million global subscribers and expanded to Australia in 2015has 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 Australian.

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."

Addendum from the lecturer: They increased the prices to $9.99, $13.99 and $17.99

respectively from 1st July 2017.And in 2019 they increased the premium plan to $19.99,

while leaving the other two prices constant.

Discuss why you think Netflix conducted this test and what you think they found from that

test based on their later decisions.

Referwhat price elasticity ofdemand is and how it is calculated and used, its relationship with revenue, and relevant

determinants of price elasticity of demand.