Discuss likely reasons why the market price of streaming television content is increasing

AS-Level Economics Paper 1 June 2023

Discuss likely reasons why the market price of streaming television content is increasing.

Draw a supply and demand diagram to support your answer.

One reason the market price for streaming television content is increasing is because of greater costs of production. This causes supply to shift to the left. Supply is the number of goods and services that firms are willing and able to produce at each given price. So, if costs of production rise then firms are going to find it difficult to produce as many goods and services at each price point. Extract A Line 10 states that 'the costs of providing streaming television content have risen' and it also mentions that each episode of Stranger Things costs £10 million per episode to make. Since supply shifts to the left, there is a new equilibrium price and quantity. The market price would increase due to the greater costs of production.

However, it is difficult to assume that supply definitely decreased in the market. For example, there has been an increase in the number of firms in the market. Figure 2 shows ten different firms with at least a 1% market share. If there is an increase in the number of firms in the market, supply would shift to the right because now firms in the market are able to produce more goods and services at each price. Also, the extract did mention that Netflix found their service to be price inelastic, so even if price was to increase, many people would hold on to their subscriptions, so this makes this a a fall in supply an even more likely cause of the increase in prices.

Another reason that could have caused the price of streaming television content to increase could have been an increase in demand. Demand is the number of tv services that people are willing and able to buy at each price. Trends can cause demand to shift. During 2021 and 2022, the UK was recovering or protecting themselves from covid. Therefore, there was a lot of self-isolation. This meant that people to change their hobbies and rely on tv for entertainment. Extract A Line 3 mentioned that 'The demand for individual firms streamed television content boomed when people were forced to stay at home'. This meant that there was a greater quantity demanded at each price, hence a right shift. The diagram below shows the increase in price from p1 to p2 as a result of both a decrease in supply and an increase in demand.

However, it is difficult to know the exact reason that caused the price of tv content to increase, as there are other factors of supply and demand. Also, the factors that affected demand for tv content such as lockdown and also new shows like 'The Mandalorian' (Line 8) are temporary changes in tastes and fashions that might not last. It could be that over time, streaming television content does not remain as popular, so therefore this could not be a reason for a sustained rise in prices.