Thanks, and I understand that... but I feel like you don't understand the context of my reply.
Mr. Beer above stated that an increase in demand for Netflix would not increase the market price of Netflix. But because Netflix is a quasi-monopoly, they would be likely to increase prices to find the new equilibrium maximum profit point.
That is, he made a microeconomic argument which was invalid-- arguing that because Netflix's marginal cost is low the price elasticity of the product they supply must necessarily be low-- but this is not necessarily true. Netflix has some degree of pricing power.
I made no macroeconomic argument, and.. while I agree with your macroeconomic assertions... increasing the supply of money still increases inflationary pressures. If you're facing massive deflationary headwinds because of slowing velocity of money, sure, it may not be enough to cause inflation or even entirely prevent deflation, but it still is net inflationary.
My reading of GPs comment was more about the cause and effect of any corresponding price increase, not whether Netflix would actually increase their price in this scenario.
For a physical good, if you have a surge in demand as more people can afford you're product you start running into supply issues. This will likely result directly in a price increase as you can't increase profit by just selling more when you don't have anymore to sell.
In the example of netflix, the supply issue almost completly disappears. They don't HAVE to increase the price to increase their profit. Yes Netflix may decide that with the flood of new customers they can put the price up and maintain or increase their profit.
The point I think that is being made is that their isn't a physical supply issue in effect "forcing" them to increase the price. They are doing it because they want to, not because they need to.
Sure, there's no "force" to increase the price. But finance and marketing wonks read books like "Pricing and Revenue Optimization", and seeing a big upswell in demand are tempted to do the math again and see what the new maximum profit point is if they have pricing power.
>But because Netflix is a quasi-monopoly, they would be likely to increase prices to find the new equilibrium maximum profit point.
That's the thing though, if they have a perfectly horizontal supply curve, then the maximum profit point would move horizontally but not vertically, and price would not increase. This sort of analysis is surely too simplistic, but that's the model.
Mr. Beer above stated that an increase in demand for Netflix would not increase the market price of Netflix. But because Netflix is a quasi-monopoly, they would be likely to increase prices to find the new equilibrium maximum profit point.
That is, he made a microeconomic argument which was invalid-- arguing that because Netflix's marginal cost is low the price elasticity of the product they supply must necessarily be low-- but this is not necessarily true. Netflix has some degree of pricing power.
I made no macroeconomic argument, and.. while I agree with your macroeconomic assertions... increasing the supply of money still increases inflationary pressures. If you're facing massive deflationary headwinds because of slowing velocity of money, sure, it may not be enough to cause inflation or even entirely prevent deflation, but it still is net inflationary.