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Answer to Question #62013 in Microeconomics for Benjamin Logan

Question #62013
1. YouTube, a popular and free video-sharing website, has introduced a new premium subscription service called YouTube Red. YouTube Red will remove advertising from all videos and include some additional content. The price of the subscription is $9.99 USD per month. Suppose YouTube knows that at the current price, the point elasticity of demand for the service is elastic.
Select the item from the list provided to make the following statements true.

In order to increase revenue, YouTube should __________ the price of YouTube Red.

YouTube Red could be considered a __________ item because you can still view videos on YouTube (with advertising) without paying for YouTube Red.

A 1% increase in the price of YouTube Red would lead to a __________ than 1% decrease in the number of subscribers.
1. budget
2. 1
3. greater
4. 0.18
5. necessary
6. increase
7. luxury
8. 0
9. decrease
10. time
11. substitute
12. demand

Expert's answer
1. YouTube, a popular and free video-sharing website, has introduced a new premium subscription service called YouTube Red. YouTube Red will remove advertising from all videos and include some additional content. The price of the subscription is $9.99 USD per month. Suppose YouTube knows that at the current price, the point elasticity of demand for the service is elastic.
Select the item from the list provided to make the following statements true.

In order to increase revenue, YouTube should decrease (9) the price of YouTube Red.

YouTube Red could be considered a luxury (7) item because you can still view videos on YouTube (with advertising) without paying for YouTube Red.

A 1% increase in the price of YouTube Red would lead to a greater (3) than 1% decrease in the number of subscribers.
1. budget
2. 1
3. greater
4. 0.18
5. necessary
6. increase
7. luxury
8. 0
9. decrease
10. time
11. substitute
12. demand

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