The correct answer is: D. no change in demand.
Income elasticity of demand is a measure of how responsive the demand for a good or service is to changes in income. It is calculated by dividing the percentage change in the quantity demanded of a good or service by the percentage change in income.
If the income elasticity of demand is zero, then a change in income will not cause any change in the quantity demanded of the good or service. This means that the good or service is a necessity, and people will continue to demand it regardless of their income.
For example, food is a necessity, and the demand for food is relatively inelastic. This means that even if people’s incomes increase, they will not significantly increase their consumption of food.
On the other hand, if the income elasticity of demand is negative, then a change in income will cause a decrease in the quantity demanded of the good or service. This means that the good or service is a luxury, and people will demand less of it as their incomes increase.
For example, vacations are a luxury, and the demand for vacations is relatively elastic. This means that even if people’s incomes increase, they will significantly decrease their consumption of vacations.