Neville, in Problem 2, Has a Friend Named Algernon

question 7

Multiple Choice

Neville, in Problem 2, has a friend named Algernon. Algernon has the same demand function for claret as Neville, namely q = .02m - 2p, where m is income and p is price. Algernon's income is $5,500 and he initially had to pay a price of $20 per bottle of claret. The price of claret rose to $50. The substitution effect of the price change

• A) reduced his demand by 60.
• B) reduced his demand by 18.
• C) reduced his demand by 102.
• D) increased his demand by 60.
• E) reduced his demand by 28.

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Definitions:

Corporate Prospectus

A formal document that companies issue to potential investors, detailing the financial health, risks, and objectives of the company, often in the context of a public stock offering.

Stock Certificate

A document that serves as a stockholder’s proof of ownership in a corporation.

Negotiable Instrument

A written document signed by a person who makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument; an acceptable medium for exchanging value from one person to another.

Criminally Liable

The state of being legally responsible for the commission of a crime, subjecting the individual to criminal prosecution and penalties.