Studies show that the income elasticity of demand for wine is approximately five.What does this mean?
A)A 1 percent decrease in the price of wine leads to a 5 percent increase in wine consumption.
B)A 1 percent increase in income leads to a 5 percent increase in wine consumption.
C)A 5 percent increase in income leads to a 1 percent increase in wine consumption.
D)Wine is a relatively elastic good.

Question

Quizplus · Accepted Answer

The income elasticity of demand for wine being approximately five means that a 1 percent increase in income leads to a 5 percent increase in wine consumption.

Studies Show That the Income Elasticity of Demand for Wine