Question

Netflix had expected a jump in their revenues, but instead they lost some. What type of elasticity of supply might they have if they thought they could expand enough by raising revenues and adding many shows to their lineup?

Answer 1

The law of demand says that when the price of a good increase the quantity demanded of that good decreases.Elasticity measure the degree of change between price and quantity demanded.If a good is highly elastic then even a small change in price creates a relatively larger change in the quantity demanded of that good.

Netflix may have elastic demand as due to small decrease in price , number of customers to buy Netlix where larger .

As we know Total Revenue = Price * Quantity

So due to small fall in price , Netflix lost some total revenue but due to higher number of buyers or Quanitities they have higher jump in the total revenues .