In regards to question 2, when dem=1, the effect is not 10.50 + 0.07*income. That is because under this scenario, the coefficient for dem is added to the intercept, while the coefficients for income and the interaction term are added together. In regards to question 3, we are only interested in the effect income has on respondents feelings. The only way to appropriately evaluate this effect is when variables dem and nondem are equal to zero.