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Category > Economics Posted 03 May 2017 My Price 4.00

Peregrine

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

 

 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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(15)
Status NEW Posted 03 May 2017 07:05 AM My Price 4.00

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