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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