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Tutebooklet s1 2011 13th Ed
Tutebooklet s1 2011 13th Ed
SCHOOL OF ECONOMICS
ECON1202
QUANTITATIVE ANALYSIS FOR
BUSINESS AND ECONOMICS
SEMESTER 1 2011
Tutorial Booklet
2
General Guidelines
You must prepare the tutorial questions each week and take them to your
tutorial. Additional discussion questions will be provided at the tutorial.
Full references to textbooks are listed in the course outline and are identified here
by the initials of their authors. HPW = Haeussler, Paul and Wood and KZB =
Knox, Zima and Brown.
WEEK 2
Remember that you must complete the “Lines and Inequalities” Adaptive
Tutorial, which will give you access to the In-Tutorial Test in Week 4,
worth 8% of your final mark.
Remember to register your assignment group members at this tutorial.
TUTORIAL QUESTIONS
2. Find x in log x (6 4 x x 2 ) 2 .
3. KZB 1.1 Problem 12, p.5 - Find the present value of $100 due in 3 months if the
rate is 11% p.a. simple interest.
7. Find the present value of $6500 due in four years at a bank rate of 5.8%
compounded daily. Assume that the bank uses 360 days in determining the daily
rate and that there are 365 days in a year; that is, compounding occurs 365 times in
a year.
8. A student has to make four payments of a debt. The first is due in 1 month, the
second and third in 6 months and the fourth in 12 months respectively. The first is
half the size of the second and twice the size of the third payment, while the first and
the last payments are the same.
If a student chooses to make repayments of $4,000 in 12 months and $8,000
immediately, find the value of the first repayment using 6 months as your focal date.
Interest rate is 7% per annum compounded daily for the first 2 months, then 8% per
annum compounded monthly for the following 4 months, and nominal rate of 10%
continuously compounded for the rest of the year. Assume one month is equal to 30
days.
1. Find the interest earned over 5 years on an investment of $2000 paying simple
interest of 7.5% per annum (p.a.).
Which investment will have the greatest future value after 5 years?
(a) $2,000 invested for 2 years at 5.4% p.a. compounded quarterly, then for 3
years at 6.0% compounded monthly.
(c) $800 invested at 4.9% compounded weekly and $1,200 invested at 6.2% p.a.
compounded annually for 5 years.
4. Find the effective annual rate of interest for the investments in Self Study Question
2, parts (a) and (b) above.
6. You are offered a choice of three types of bank account. These accounts earn,
respectively:
WEEK 3
TUTORIAL QUESTIONS
Set up a spreadsheet for your calculations. Check your answers using the inbuilt NPV
function.
Plan A: Sam should invest $5,000 on his 21st birthday then $2,000 on each birthday
up to and including his 31st . No further deposits are made but the money
invested continues to earn interest until his 65th birthday.
Plan B: Sam should make the first deposit of $5,000 on his 31st birthday then
continue to deposit $2,000 per birthday with the last deposit being made on
his 65th birthday.
If the effective annual rate of interest is 7.5% p.a., how much should Sam have in
savings at age 65 under each plan?
1. A farmer is planting a crop of potatoes using seed potatoes at a cost of $200 and
has a choice of two harvest time options. If he harvests them at “cocktail size”,
12 weeks after planting, the yield will be 1,000 kg and he will receive a price of
$1.25 per kilogram. However if they are left to grow to maturity at 24 weeks, the
yield will be 2,500 kg and they will sell for 50c per kilogram. At an interest rate
of 9% p.a. compounded weekly which option gives the higher net present value?
3. A debt was originally due to be repaid with one payment of $10,000 in 4 years'
time. Under new arrangements it will be repaid by installments of $x at the end of
1 year, $2x at the end of 3 years and $4x at the end of 5 years. Find x if interest is
charged at a rate of 6% p.a. compounded quarterly.
7
WEEK 4
In-tutorial Test 1 is held during tutorial hour of this week. The test can be
taken by all students who completed the “Lines and Inequalities”
Adaptive Tutorial in Week 2. Make sure you attend your tutorial for the
test. Material covers lectures 1-4.
TUTORIAL QUESTIONS
3 5 2 10 0.5 2 1
1. If A B 3 6 C 3 0.8 4
4 7
Find (a) AB (b) BC (c) CA (d) BA if possible. If it is not possible to find any of these
products give the reason why.
4. Suppose that when 3 products (1, 2 and 3) are priced at p1 , p2 and p3 , respectively,
D D D
the quantities demanded are q1 , q2 and q3 , respectively, and the quantities
S S S
supplied are q1 , q2 and q3 , respectively. The demand and supply functions are
interrelated and given by:
D
q1 10 3 p1 4 p2 2 p3
S
q1 7 2 p1 p2 2 p3
D
q2 3 2 p2 3 p3
S
q2 3 p2 4 p3
D
q3 6 3 p1 3 p2 p3
S
q3 3 5 p1 4 p2 p3
Write as three equilibrium equations then convert to matrix form, Ap = b. Find the
inverse of A then multiply to find the equilibrium prices ( p A b ). Finally find
1
8
the equilibrium quantities. Check your matrix inversion and multiplication using
Excel. Remember to use array formulas as shown in the computing guide.
5 0
1 2 3
X 1 2 Y
5 4 2
4 1
calculate XY and YX. What implication does this result have for solving matrix
equations? Show that XY Y T X T .
T
3.
20 4 4 5 0 1
A B C
6 8 2 3 2 5
4 6 3 2
5. A B .
1 9 5 7
6. Write the following linear systems in the form Ax = b. In which cases is it possible
to find A1 ? Where the inverse can be found, use this to solve for x. Where no
inverse can be found give a reason.
9
7. Solve the following system of equations by using Excel to find the inverse of the
coefficient matrix then multiplying.
4 x1 5 x2 2 x3 5 x4 108
2 x1 x3 6 x4 250
2 x1 2 x2 x3 x4 190
4 x1 3x2 5 x3 9 x4 400
2 4 1 1 2 3
3 2 5 0 2
(a) (b) 9
2 3 2
0 0 1
10
WEEK 5
TUTORIAL QUESTIONS
5. A television station must schedule four programs for a particular night and has to
decide which programs to show and the order in which they will run. The station has
eight programs from which to choose. How many possible schedules are there?
WEEK 6
In-tutorial Test 2 is held during tutorial hour of this week. Make sure you
attend your tutorial for the test. Material covers lectures 5-8.
TUTORIAL QUESTIONS
.
12
1. If a person watches a certain TV daily evening news program on one evening, then
the probability that the person watches that program the next evening is 0.7.
However, if the person does not watch the program one evening, then the probability
that the person watches the program the next evening is 0.2.
(a) If the person watches the program on Monday, what is the probability that the
person watches the program on Wednesday?
(b) If 20% of the population watches the program on Thursday, what percentage
can be expected to watch on Friday?
2. A college dining hall has available two fruit juices for breakfast: orange and
grapefruit. One hundred students drink juice on a daily basis. It is found that a student
will not drink grapefruit juice on two successive days, and if a student drinks orange
juice one day, then the following day the student is equally likely to drink orange
juice as to drink grapefruit juice. If 40 of the regular juice drinkers drink orange juice
on Monday, how many can be expected to drink orange juice on Wednesday?
WEEK 7
You should work on Assignment Part A this week (11-17 April 2011).
TUTORIAL QUESTIONS
The owner of the only music store in a country town has had the following conditions
imposed on her order for the first month after the release.
i. The minimum order for each group’s recording is 50 CDs.
ii. No more than 400 Beetle albums will be available to each store.
iii. The total order for both albums cannot exceed 900.
The owner also knows that past sales indicate that the number of ADDA fans in town is
at least one third the number of Beetle fans so she will maintain this ratio in the number
of albums ordered. The store will sell the ADDA CD for $30 and the Beetle double CD
album for $45. It can be assumed that, due to the enormous publicity surrounding the
releases, all albums ordered will be sold. How many of each album should be ordered to
maximise the value of sales?
(b) Draw a graph clearly marking the feasible region and at least one iso-objective line.
Find the number of albums from each group which should be ordered to maximise
the value of sales.
(c) Suppose that the record company decided that instead of a limit of 400 Beetle
albums, the store could order one extra album for each $5,000 of orders in the
previous year. What would be the extra sales that would result from each extra
album ordered and up to what limit would this value apply.
(d) If the store owner decided to use the Excel Solver function to solve this problem she
would first need to provide an arbitrary value of the objective function. If the values
in cells A2 and B2 below reflect arbitrary order numbers, what Excel formula (with
cell addresses) should be used in C2 to calculate sales?
14
A B C
1 ADDA Beetles Sales
2 100 200
3
The Humongous Hamburger chain employs staff at two wage rates, $12 per hour
for seniors and $8 per hour for juniors. A store manager wishes to minimise the
cost of wages over the next month. She must, however, satisfy the following
conditions in setting staff levels.
The number of junior staff hours must be at least three times the number of senior
staff hours. In any one month the total number of hours the staff are employed must
be no less than 1% of the number of hamburgers sold. The expected number of
hamburgers to be sold next month is 165,000. The store has contracted to employ
seniors for at least 120 hours next month.
(a) Write down the objective function and constraints for this problem.
(b) Draw a graph, showing junior hours on the horizontal axis, which clearly
shows the feasible region and at least one iso-objective line.
(c) Determine the combination of staff hours which will minimise the store’s
wages cost for the coming month.
15
WEEK 8
TUTORIAL QUESTIONS
1. SOLVER
“Transport authorities have promoted the use of buses and trains to those who will attend
an event at a new showground. While this is desirable to avoid traffic problems, it offers
the transport authority an opportunity to gain revenue from public transport. A maximum
of 170,000 people are expected to arrive at the showground in any one day, but at least
36,000 will use private transport. The number of buses that can arrive in one hour is 60,
each with a capacity of 70 persons. The number of trains that can arrive per hour is 20,
each carrying up to 500 persons.
Buses and trains arrive at the showground for 10 hours per day. The number of people
travelling by bus is at least 25% of the number coming by train. Bus tickets cost $6 and
train tickets cost $4 per person.
Determine how many bus travellers and how many train travellers per day will maximise
the transport authority’s revenue and state the maximum revenue.”
The above linear programming problem is being solved using Excel Solver. Try to write
down the objective function and constraints on paper then look at the screenshots below
and answer the questions.
(a)
16
Guess values for x (no. bus travellers) and y (no. train travellers) have been entered in A2
and B2. Write down the formulae that have been used in cells C2 and B4:B9. (Hint:
Constraint 1 relates to the total number of public transport passengers, Constraint 2
relates to bus capacity, Constraint 3 relates to train capacity, ...)
(b)
Show how this dialog box should be completed for each of the six constraints.
(c)
17
Use the answer report to explain how many people must travel by bus and by train to
produce maximum revenue and what is the maximum revenue.
(d) Look at the Status column in the Answer Report and determine for what form of
transport there is extra capacity when revenue is optimised.
2. A surfboard manufacturer knows that the weekly cost of production, C, and revenue,
R, are functions of output, q, given by:
C 1550 800 q
R 0.58q 2 400q
Evaluate:
(a) profit;
(b marginal cost;
(c) marginal revenue;
(d) average cost when 30 surfboards are produced per week.
18
WEEK 9
TUTORIAL QUESTIONS
6. Marginal cost: if c 0.3q 2 2q 850 is a cost function, how fast is the marginal
cost changing when q=100?
19
WEEK 10
TUTORIAL QUESTIONS
1. The Springhill Spa company can sell 3000 litres of mineral water per day if it charges
80c per litre. For each extra 5c rise in price it sells 100 fewer litres of water per day.
What selling price will maximise the company's income? What is the maximum daily
income?
2. A fast food chain has been petitioned by environmentalists to reduce the amount of
polystyrene used in packaging. The company wishes to design a new chicken
container that will minimise the area of polystyrene needed. The box must have a
volume of 800 cubic cm. It will be made from a single T shaped piece of material
which can be folded to form a top, bottom, four sides and a tuck-in flap. The flap has
the same dimensions as one of the sides. The top and bottom are equal sized squares.
What are the dimensions of the box that minimise the area of polystyrene used?
used. The monopolist can buy any amount of the input at the per unit price of 2, and
faces an industry (inverse) demand function given by p 30 3q , where p is the
price per unit of the output. Assume there are no fixed costs. If all output is sold
and the production level is set to maximise profits, what will the market price be?
Also derive an expression for the marginal revenue product of the input.
(From final exam Session 1, 1993)
4. Suppose that the sales revenue from a particular cultured pearl harvest is (6 + 2.4t)
thousand dollars if the pearls are harvested t years after implantation in the oysters. If
the discount rate is 6% per annum compounded continuously, and the present value of
sales revenue is to be maximised, when should the pearls be harvested and sold
(expressed as number of years after implantation). Do not bother to check the second
order condition for a maximum.
x 1 1
3t
1 e
(a) dx (b) 2
dt
0 3
x2 2x 3 1 t
te
1
t 2
(c) 0
dt
21
WEEK 11
In-tutorial Test 3 is held during tutorial hour of this week. The test can be
taken by all students who completed the “Linear Programming” Adaptive
Tutorial in Week 10. Make sure you attend your tutorial for the test.
Material covers lectures 9-18.
TUTORIAL QUESTIONS
1. Find the area of the region bounded by the graphs of the given two equations.
y 3 x ,3 x 2 y 15.
(b) Due to the rumour and the panic buying it sets off, stocks of canned food available for
sale in the country fall at a rate proportional to their current level at any time.
Originally 20 million tonnes of canned food were held. After two days the level had
fallen to 15 million tonnes. Using integration derive a formula for the number of
million tonnes, T, available at any time. How long will it take for the stock available
to fall to 1 million cans?
p
for p < 2400
(2400 p)
where p is the price per tonne.
Assuming the price elasticity expression above is correct, show that the annual
demand for Nice’N’Salty wheat as a function of p is given by
p
Q 1200 where Q is the annual production in ٛ ones.
2
2. For each of the following differential equations, find the general solution and the
particular solution corresponding to the given initial condition.
dy 1
(i) 3x 2 y , y 0
dx 2
dy e x
(ii) , y 0 n2
dx e y
1
dy x2
(iii) , y 0 7
dx y 5 2
3. A country town, affected by the withdrawal of key manufacturing industries, has had
a declining population for a considerable period. The rate of change at any time has
been proportional to the population at that time. At 30th June, 1990 the population
was 24,500 and four years later it was 18,000. At the current rate of change how
long will it take for the town’s population to decline to 6,000 people?
23
WEEK 12
TUTORIAL QUESTIONS
WEEK 13
TUTORIAL QUESTIONS
As before, capital costs r per unit, and labour costs w per unit, implying that total
expenditure on inputs is:
a. Set up the problem, writing out the objective function, the constraint, and the
Lagrangian function.
b. Write the system of first-order conditions. Is this a linear system?
4. An entrepreneur has 5 hours each day to devote to her business. Her business
involves two types of tasks. If she devotes x hours to the first and y hours to the
second, then her profit is
1. A certain postal service only accepts rectangular packages having the sum of the
length and girth (i.e. perimeter of side with the smallest area) no greater than 120cm.
25
Find the dimensions (length width height) of the greatest volume rectangular
package satisfying this requirement. Try to solve this problem without using the
Lagrange multiplier method.
The Shiver family, which lives in a relatively cold region of Oz, has found from
experience that its home must be artificially heated for 1600 hours during the three
months of winter. The Shivers’ home is equipped with both a gas heating system
and an electrically powered reverse-cycle air conditioner (which can also be used for
home heating).
Let x1 and x 2 be the number of hours of home heating using gas and electricity,
respectively, for the Shivers’ home during winter. Also assume that there is no
advantage to be gained from operating the two heating systems simultaneously.
The new resource pricing schemes are such that the prices paid per hour by the
Shivers for home heating during the winter months are given by
Determine the combination of x1 and x 2 which minimizes the cost of heating the
Shivers’ home 1600 hours during winter. What is this minimum cost? You need to check
the second order conditions as well.