Suppose That Studies Show That the Income Elasticity of Demand

Multiple Choice

Suppose that studies show that the income elasticity of demand for cigarettes is approximately five. What does this mean?

A) A five percent increase in income leads to a one percent increase in cigarette consumption.
B) A one percent increase in income leads to a five percent increase in cigarette consumption.
C) Cigarettes are a relatively elastic product.
D) A one percent decrease in the price of cigarettes leads to a five percent increase in cigarette consumption.