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7 November, 09:47

A firm's demand equation is given by: Qd = 60 - 60P + 2Y, where Qd is quantity, P is price, and Y is income. If price increases by $2 and income increases by $80, then quantity demanded will:a. increase by 160 units. b. increase by 80 units. c. decrease by 120 units. d. increase by 40 units. e. decrease by 60 units.

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  1. 7 November, 10:39
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    d. increase by 40 units

    Explanation:

    We post the increments in the formula and check;

    Qd'' = 60 - 60 (p + 2) + 2 (Y + 80)

    Qd'' = 60 - 120 - 60p + 160 + 2Y

    Qd'' = 100 - 60p + 2Y

    Qd = 60 - 60p + 2Y

    we subtract one from another and the difference is the incremental oor decremental that arise as a result of the changes:

    100 - 60 - 60p - (-60p) + 2y - 2y = 40
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