Section B
With reference to Figure 1 and Extract A, explain the relationship between price elasticity of demand and total revenue. (5 marks)
PED for TV content is inelastic as it is -0.6 as stated in figure 1. This means that a 10% increase in price will only lead to a 6% fall in demand. This means that firms can increase prices and see an increase in total revenue. If demand is elastic, then firms would lose total revenue if they raised prices because demand would fall by a larger proportion compared to the increase in price. Extract A says 'only 3% would cancel' their Netflix subscription.
With reference to Extract B, explain two external benefits associated with the consumption of ‘public service broadcasting’ (line 2). (6 marks)
An external benefit is when the consumption of public service broadcasting benefits a third party. The third party is someone other than the buyer or the seller (in this case the consumer of the public broadcasting).
One purpose shown in extract b is to 'support learning' for all ages. If people have better access to education, this could increase innovation in terms of businesses, or increase skill level and therefore productivity at work. This would lead to greater contributions of income tax through people working better jobs, or higher corporation tax receipts through businesses earning more profit.
‘Television content is a public good’ (Extract B). Assess this statement. (10 marks)
Some may argue that TV content is a public good. A public good is non excludable and non rival. TV is non rival meaning that if one person watches TV, this does not reduce the ability for anyone else to watch TV. In theory, infinite people can watch the same TV channel at the same time. Public goods are also non excludable. This means it is impossible to prevent anyone from accessing the service. If something is non-excludable, it leads to the free rider problem. Extract B says 'very few people would pay due to the free rider problem.' If the TV channel is already running, there is no reason for anyone to pay.
However, there is an enforcable TV license fee which people have to pay in order to watch TV. There are also many TV channels and platforms which require subscriptions or fees to watch. Therefore, you could argue that TV is excludable. It is however, non-rival. Therefore some may argue that TV is a quasi public good.