Unit 2 → Subtopic 2.4
Analyzing the Elasticity of a Netflix Subscription
Streaming services like Netflix, Disney+, and Spotify have transformed how consumers access entertainment. However, their pricing strategies rely heavily on understanding price elasticity of demand—the degree to which consumers are willing to continue their subscriptions when prices increase. This project challenges students to analyze whether Netflix’s subscription service is price elastic or inelastic, using real-world data gathered through a consumer survey.
Students will design and distribute a survey to collect opinions on how consumers react to price changes in streaming services. They should ask respondents how they would respond if their Netflix subscription price increased by 10%, 20%, or more. Would they continue paying, switch to a competitor, or cancel their service altogether? By analyzing the survey responses, students will determine whether Netflix’s demand is elastic (highly sensitive to price changes) or inelastic (relatively unresponsive to price changes).
A key factor to explore is the availability of substitutes—if Netflix raises prices too much, will consumers turn to free streaming platforms like YouTube or opt for competitors like Amazon Prime Video? Additionally, students should consider consumer income levels, as affordability plays a role in how price changes impact demand. They should also investigate past pricing decisions by Netflix to see whether previous price hikes resulted in significant subscriber losses.
The final report should summarize survey results, discuss trends in consumer behavior, and provide an economic analysis of Netflix’s price elasticity of demand. The goal of this project is to connect real-world pricing strategies with economic theory, demonstrating how businesses anticipate consumer reactions when adjusting their pricing models.
Recommended Procedure:
Design and Distribute the Survey – Create a questionnaire that asks respondents how they would react to different Netflix price increases. Include questions on alternative choices, income levels, and past subscription behaviors.
Collect and Organize Data – Gather survey responses and classify them based on trends, such as willingness to continue paying versus likelihood of canceling.
Analyze Price Elasticity Trends – Determine whether the demand for Netflix is elastic or inelastic based on how many consumers would cancel or switch services at different price points.
Compare Findings to Real-World Cases – Research past Netflix price changes and assess how they affected subscription numbers. Consider how pricing elasticity differs for streaming services compared to necessities like gas or groceries.
Write a Survey Report with Economic Analysis – Present findings in a structured format, explaining consumer behavior, elasticity insights, and the implications for Netflix’s pricing strategy.
Suggested Sources:
Understanding Price Elasticity of Demand:
Investopedia: What is Price Elasticity? – https://www.investopedia.com
Khan Academy: Elastic vs. Inelastic Demand – https://www.khanacademy.org
2. Netflix Pricing Strategies and Market Behavior:
The Verge: How Netflix Adjusts Prices – https://www.theverge.com
Harvard Business Review: The Economics of Subscription Pricing – https://hbr.org
3. Consumer Behavior and Digital Market Trends:
Nielsen Reports: Streaming Industry Trends – https://www.nielsen.com
Pew Research Center: Consumer Preferences for Online Subscriptions – https://www.pewresearch.org
4. Survey Design and Data Collection Tools:
Google Forms or SurveyMonkey for questionnaire distribution
Data visualization tools like Excel or Tableau for survey analysis
Grading Rubric:
Total Points: __ /20
