$123 per share. By the end of 2021, the stock price was just over $600 per share, and Netflix had more than 214

million subscribers in fifty countries.

What happened? Obviously, Netflix company officials understood the law of demand. Company officials reported,

when announcing the price increase, this could result in the loss of about 600,000 existing subscribers. Using the

elasticity of demand formula, it is easy to see company officials expected an inelastic response:

In addition, Netflix officials had anticipated the price increase would have little impact on attracting new customers.

Netflix anticipated adding up to 1.29 million new subscribers in the third quarter of 2011. It is true this was slower

growth than the firm had experienced—about 2 million per quarter.

Why was the estimate of customers leaving so far off? In the more than two decades since Netflix had been
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