If the income elasticity of demand for a good is 0, the quantity demanded will

• A. increase with income.
• B. decrease with income.
• C. remain unchanged as income changes.
• D. increase and decrease unpredictably.

Answer: (C)

The key idea is income elasticity of demand—the ratio that shows how much quantity demanded responds to a change in income. If this elasticity is zero, the quantity demanded does not change at all when income changes.

Mathematically, income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in income. If the elasticity is zero, the numerator—the percentage change in quantity demanded—must be zero for any change in income. So the quantity demanded stays the same regardless of whether income goes up or down.

This describes an income-insensitive good: your purchases of it don’t react to your income level. Hence, the correct interpretation is that quantity demanded remains unchanged as income changes.