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MBA, Ph.D in Management
Harvard university
Feb-1997 - Aug-2003
Professor
Strayer University
Jan-2007 - Present
Neville from your workbook has a friend named Peregrine. Peregrine has the same demand function for claret as Neville, namely q = .02m - 2p, where m is income and p is price. Peregrineâs income is $6,500 and he initially had to pay a price of $50 per bottle of claret. The price of claret rose to $60. The substitution effect of the price change
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 A.increased his demand by 20. B. reduced his demand by 26. C. reduced his demand by 20. D.reduced his demand by 14. E.reduced his demand by 24.
I know the answer is D. But why??
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