The income elasticity of the averages turned out to be -2.21. (See Figure 3) This means that Stagelights rental good is considered inferior. As income falls, Stagelights’ rentals become more attractive to consumers. This makes sense, because as income increases consumers are more willing to spend more at the movie theatre and less on rentals. The income elasticity calculation does go against Stagelights target market. The rentals are considered an inferior good, but he is targeting the rich, upscale …show more content…
For every advertising dollar spent, it leads to a 1.42 increase in sales. This is helpful to increase sales, but it does not translate into a big gain unless large amounts of advertising dollars are spent. If Stagelights truly wanted to increase sales, they would have to convince people not to have cable television or try and persuade the teenage population to use Stagelights. Currently TEENS has one of the biggest negative effects on DVD rentals. Attacking the right market with advertisements may prove more useful than current promotions in the future. The first possible solution is much more viable than increasing sales promotion