The correct answer is: A. unity.
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 demand for a good or service increases in the same proportion in which income increases, then the income elasticity of demand will be equal to unity. This means that a 1% increase in income will lead to a 1% increase in the quantity demanded of the good or service.
If the demand for a good or service increases by more than the percentage increase in income, then the income elasticity of demand will be greater than unity. This means that a 1% increase in income will lead to an increase in the quantity demanded of the good or service that is greater than 1%.
If the demand for a good or service increases by less than the percentage increase in income, then the income elasticity of demand will be less than unity. This means that a 1% increase in income will lead to an increase in the quantity demanded of the good or service that is less than 1%.
Goods that are considered to be necessities, such as food and housing, tend to have an income elasticity of demand that is less than unity. This is because people tend to spend a relatively constant amount of money on necessities, regardless of their income level.
Goods that are considered to be luxuries, such as vacations and expensive cars, tend to have an income elasticity of demand that is greater than unity. This is because people tend to spend more money on luxuries as their income increases.