The Income Elasticity of Demand for Cars Is Estimated to Be

Multiple Choice

The income elasticity of demand for cars is estimated to be 5.5 in the short run. We can conclude that:

A) when the price of cars reduces by 10 per cent, cars sales increase by 55 per cent.
B) when the price of cars rises by 10 per cent, cars sales increase by 55 per cent.
C) when income rises by 10 per cent, cars sales increase by 55 per cent.
D) when income rises by 10 per cent, cars sales increase by 5.5 per cent.