Determinants Of Supply Of Netflix
Netflix was founded by Reed Hastings who is the current CEO of the organization. Netflix is one of the world’s largest subscription service companies with corporate headquarters based in Los Gatos, California. Netflix started its operations in year 1997 with strong dependence on DVD rentals. (n.d.) The company saw DVD rentals as the medium of home entertainment. The key business of the company was DVD. Netflix didn’t see huge success at the beginning. Hasting’s innovative ideas helped him identify and explore new opportunities. This innovative culture led the company to design and develop a website that has millions of subscribers today. In year 2010 and 2011, company experienced …show more content…
Supply also refers to the willingness of the seller to sell his products at a given price. Supply can be influenced by many reasons and these are called the determinants of Supply.
1. Price – Price is the main factor that influences demand. In fact price and supply have a direct relationship. If the price of a product increases, supply increases simultaneously. This is because the seller wants to produce more and more and enhance his profit maximization by selling more items. In our example if Netflix’s price increases by 20%, Netflix would want to increase the number of members as well. Increase in members with an increase of price will lead to increased revenue.
2. Cost of production – This factor implies that supply of a product will decrease if the cost of production increases and supply would increase if the cost of production decreases. The supply of products is inversely related to the cost of production. Seller would want to sell less if the cost of production is too high. High cost of production leads to less profit and this refrains sellers to produce less. Netflix has its original content. This characteristic of Netflix is definitely a unique selling point. However if the cost of to produce original content increases, Netflix will decrease the production of original