| Price elasticity of demand | −0.4 |
| Income elasticity of demand | 1.8 |
PlayZone Premium currently has 10 million UK subscribers, who typically pay £11.99 a month to the private sector gaming firm. At this price, up to two devices can stream games simultaneously. The demand for individual platforms' services boomed when consumer home entertainment expanded, and has only begun to slow recently as more rival firms enter the market, such as CloudArcade.
The launch of QuestPass at the end of 2021, including highly anticipated exclusive titles like the £120 million action-RPG StarFall, resulted in the service adding more UK subscribers in its first year than any competitor had previously managed.
However, the costs of developing premium games have risen. Consumers now expect cinematic-quality exclusive content, and developing modern AAA games can easily exceed £100 million per project. Furthermore, marketing in a saturated digital landscape is increasingly expensive.
In 2023, PlayZone raised the price of its primary premium package by £1.50 a month to £11.99. Fortunately for PlayZone, its subscriber demand has proven price inelastic. Just 2% of customers in a survey said they would definitely cancel their subscription after PlayZone's latest price rise.
With reference to Figure 1 and Extract A, explain the relationship between price elasticity of demand and total revenue.
