Economics class: Is the ‘subscription economy’ going to feel the Netflix effect?

This article picked by a teacher with suggested questions is part of the Financial Times free schools access programme. Details/registration here.

Specification:

• Market Structures, Pricing and Output Points, Profit, Income elasticity, Regulation, Contestable Markets

Click to read the article below and then answer the questions:

Is the ‘subscription economy’ going to feel the Netflix effect?

• Using the model of a firm in imperfect competition, show the effect of the falling demand for subscription services. Comment on how this affects price output and profit (pop)

• Explain whether subscription services are income elastic or income inelastic

• New Regulation will raise the costs further to firms in the subscription economy. Evaluate the impact on both consumers and firms

• Netflix is one of a number of firms selling video content. Discuss how the falling number of subscribers affects contestability in this market

John Greenwood, Bromley High School for Girls