"If income increases then consumption increases and if income decreases then consumption also decreases."

Which of the following options is true in regards to the above statement?

The statement is generally true

Option 1: The statement is generally true

This is the most accurate option. In economics, there's a well-established concept known as the consumption function, which highlights a positive correlation between income and consumption.

For most goods and services (known as "normal goods"), consumption moves in the same direction as income. As income rises, people buy more normal goods; as income falls, they buy less. The relationship between aggregate consumption and aggregate income is also positive. The term "generally" accounts for the exception of inferior goods, where consumption decreases as income increases.