The graph above shows the demand function $Q = -2.5P + 250$. The red points indicate the given data points: (40, 150) and (60, 100).

(b) Calculating Change in Demand

Using the demand function $Q = -2.5P + 250$, let's calculate the change in demand for the specified price changes.

(i) Increase in price by €10

Let the initial price be $P = P_0$. After increasing by €10, the new price is $P_1 = P_0 + 10$.

Change in demand:

[ \Delta Q = Q(P_1) - Q(P_0) = [-2.5(P_0 + 10) + 250] - [-2.5P_0 + 250] = -2.5 \times 10 = -25 ]

So, the demand decreases by 25 units when the price increases by €10.

(ii) Decrease in price by €8

Let the initial price be $P = P_0$. After decreasing by €8, the new price is $P_1 = P_0 - 8$.

Change in demand:

[ \Delta Q = Q(P_1) - Q(P_0) = [-2.5(P_0 - 8) + 250] - [-2.5P_0 + 250] = -2.5 \times (-8) = 20 ]

So, the demand increases by 20 units when the price decreases by €8.

Would you like any further details, or do you have any questions?

Related Questions:

1. How does the slope of the demand function affect the elasticity of demand?
2. What is the demand when the price is €0?
3. What would happen to the demand if the price increases to €80?
4. How would the demand function change if a fixed cost is introduced?
5. What are the limitations of using a linear demand function?

Tip: When analyzing demand functions, always consider both the price elasticity and external factors that may influence consumer behavior!