If we relate pharmaceutical expenditures to income with the regression:

Expenditures) = a + b x Income

the elasticity of expenditures with respect to income is: (Explain)

1. coefficientbmultiplied by (mean expenditure/mean income).
2. coefficientbmultiplied by (mean income/mean expenditure).
3. coefficientb.
4. coefficientbdivided by coefficienta.

In the diagram below, we relate pharmaceutical expenditures to income with the regression: Slope = b X X X X X X X X X X X Expenditures X X X X X X X X X X X X Income