Neville, in Problem 2, Has a Friend Named Edmund

Neville, in Problem 2, has a friend named Edmund. Edmund has the same demand function for claret as Neville, namely q = .02m - 2p, where m is income and p is price. Edmund's income is $9,000 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) reduced his demand by 36.
B) increased his demand by 20.
C) reduced his demand by 4.
D) reduced his demand by 20.
E) reduced his demand by 14.

Correct Answer:

Verified

Show Answer