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Neville, has a friend named Edmund. Edmund has the same demand function for claret as Neville, namely q = .02 m 2 p , where
Neville, 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:
- reduced his demand by 4.
- reduced his demand by 20.
- reduced his demand by 36.
- reduced his demand by 14.
- increased his demand by 20.
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