Final answer:
The price elasticity of demand for Netflix appears to be inelastic, as the company's own predictions regarding subscriber loss following a price increase indicate. This inelastic demand suggests a smaller decrease in quantity demanded relative to the price increase.
Step-by-step explanation:
The price elasticity of demand for Netflix can be considered inelastic. When Netflix announced a price increase, they expected to lose 600,000 existing subscribers, which suggests an inelastic response to the price change. This expectation is based on the elasticity of demand formula. The inelastic nature of demand for Netflix indicates that customers do not significantly reduce their subscription quantities in response to price increases. Economically, this could be due to the high value customers place on the service or the lack of close substitutes at the time, despite the growing competition. However, the increase in alternative streaming services could lead to a more elastic demand over time, as customers have more venues to turn to if prices rise.