Netflix Profit Maximization

Marginal Revenue = Marginal Cost

Price
Netflix being an
Demand 1 Demand 2
streaming platform is
highly scalable hence
P1 Supply no additional cost for
new subscription
Q1 Q2
Quantity
perfectly elastic supply
 Netflix Economies of Scale

Investment for future

Unit Cost
Netflix will be able to cover the
unit cost and the expenses will
Long run average cost(LRAC) go down as they develop more
original content while attracting
more customers with the kind of
content they create, eventually
leading to more subscription

Output
 Netflix Slope Zero

Price Slope = 0
Netflix while increasing the
price will reach a point of slope
zero where the consumers will
shift to substitutes and price
decrease in comparison to the
consumers might be able to
rescue them

Subscriber
 Netflix Price Elasticity of Demand

Price
Netflix has several substitutes
D2 D1 hence has a large price elasticity
since there are options available
P1 for the consumers at competitive
prices which may lead to loss in
P0
clientele at least apart from there
loyal customers.

Q0 Q1 Q0` Q1`
Quantity