Joan's income has just risen from 940 per week to 1,060 per week. ...

[madam-professor]

Joan's income has just risen from 940 per week to 1,060 per week. As a result, she decides to purchase 12 percent more lettuce per week. The income elasticity of Joan's demand for lettuce is
 
  A) 0.75.
  B) 0.90.
  C) 1.00.
  D) 1.33.

Question 2

In the foreign exchange market, if the demand for the U.S. dollar increases, the U.S. dollar appreciates in value. Briefly explain whether the previous statement is correct or incorrect.
 
  What will be an ideal response?

[todom5090]

Answer to Question 1

C

Answer to Question 2

The statement is correct. The increase in the demand for dollars shifts the demand curve for dollars rightward and creates a shortage of dollars at the initial exchange rate. This shortage puts upward pressure on the exchange rate and so the exchange rate rises to its new equilibrium value.