UNIVERSITY OF MAURITIUS

YEARLY EXAMINATIONS

MAY 2012

PROGRAMME BSc (HONS) BUSINESS ECONOMICS WITH INFORMATION

SYSTEMS – YEAR 2 + YEAR 3

MODULE NAME QUANTITATIVE METHODS FOR BUSINESS

DATE THURSDAY MODULE CODE ECON 1003Y(1)

03 MAY 2012

TIME 09.30 – 12.30 HRS DURATION 3 HOURS

NO. OF 8 NO. OF QUESTIONS 5

QUESTIONS SET TO BE
ATTEMPTED

INSTRUCTIONS TO CANDIDATES

There are 2 Sections in this paper: Section A and Section B.

Section A consists of 4 questions. Answer at least 2 questions from Section A.

Section B consists of 4 questions. Answer at least 2 questions from Section B.

Answer 5 questions in all.

All questions carry equal marks.

Use separate answer books for each Section.

Statistical Tables are provided.

Silent, non-programmable calculators are allowed.

 Quantitative Methods for Business-ECON 1003Y

SECTION A
ANSWER AT LEAST TWO QUESTIONS FROM THIS SECTION.

QUESTION 1

The Demand and Supply curves for a particular product are given by the following functions where
Qd is the quantity demanded, Qs is the quantity supplied and P is the price in $.

Qd = 100 − 0.5P
Qs = P − 20

(a) Determine the equilibrium price and quantity.

[2 marks]

(b) Sketch the demand and supply curves on a single diagram.

[3 marks]

(c) Determine the price and quantity at which the price elasticity of demand is unitary.

[3 marks]

(d) Show that the supply curve is elastic.

[2 marks]

(e) Determine the type and level of price control that would lead to a surplus of 15 units in the market.

[3 marks]

(f ) Illustrate and explain the impact of a maximum price of $40.

[3 marks]

(g) Calculate the change in producer if the government imposes a per unit tax of $6 on producers.

[4 marks]

[Total: 20 marks]

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 Quantitative Methods for Business-ECON 1003Y

QUESTION 2

A monopoly sells its product in two different markets where the demand functions are given as fol-
lows where Q represents the quantity of the product in units and P the price in $:

Market 1 : Q1 = 220 − 40P1

Market 2 : Q2 = 140 − 20P2

The monopolist incurs a fixed cost of $500 and no variable cost at any production level.

(a) Write down the following functions:

(i) the Inverse demand functions.

(ii) the total revenue function in terms of Q1 and Q2 .
(iii) the total cost function.
(iv) the marginal revenue functions.
(v) the marginal cost functions.
(vi) the profit function.
[2+1+1+1+1+1=7 marks]

(b) Determine the profit maximizing output and the price charged in each market if the monopolist
can accurately separate the consumers in each market.

[4 marks]

(c) Write down the functions representing the point price elasticity of demand in each market.

[4 marks]

(d) Using the concept of price elasticity of demand, explain why the monopolist chooses to charge
different prices for the same product.

[2 marks]

(e) Calculate the price charged and quantity supplied in each market if the monopolist is forced to
charge the same price in both markets.

[3 marks]

[Total: 20 marks]

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 Quantitative Methods for Business-ECON 1003Y

QUESTION 3
√
(a) Sketch the curve y = x.

[3 marks]
√
(b) Derive the first derivative of the function y = x from first principles.

[4 marks]

(c) Determine the first derivative of the following functions:

(i) y = x5 e−3x
x+3
(ii) y = 2
x −5
[2+2=4 marks]

(d) Evaluate the following:

∫ 2
(i) (2x2 + 1) dx
1
∫ 1
(ii) e2x dx
0
∫ π
(iii) x sin 2x dx
0

[3+3+3=9 marks]

[Total: 20 marks]

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 Quantitative Methods for Business-ECON 1003Y

QUESTION 4

(a) Consider the following system of equations:

3x + y - z = 2
x + 3z = 12
-x + 2z = 3

(i) Use Simultaneous Equations to solve the system of equations.

(ii) Write the system of equation in matrix form.
(iii) Use Cramer’s Rule to solve the system of equations.
(iv) Use the Inverse Matrix method to solve the system of equations.
[3+2+6+4=15 marks]

(b) Use Simplex Method to solve the following linear programming model:

Maximize Z = 5w + 6x
subject to w+x ≤ 20
w−x ≤ 15
x ≤ 15
w, x ≥ 0

[5 marks]

[Total: 20 marks]

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 Quantitative Methods for Business-ECON 1003Y

SECTION B
ANSWER AT LEAST TWO QUESTIONS FROM THIS SECTION.

QUESTION 5

(a) Distinguish between the following:

(i) Descriptive Statistics and Inferential Statistics

(ii) Interval Scaled Variable and Ratio Scaled Variable
[2+2=4 marks]

(b) A buyer of electric bulbs has obtained samples of bulbs from two suppliers A and B. Laboratory
tests on the length of life of the bulbs in the samples gave the following results:

Length of Life (in hours) Number of Bulbs Tested

Supplier A Supplier B
600 and under 800 20 6
800 and under 1000 32 84
1000 and under 1200 52 24
1200 and under 1400 16 6

Calculate a measure of relative dispersion for each set of bulbs and state which supplier’s bulbs
have more uniform length of life.

[7 marks]

(c) (i) List the main problems encountered in the construction of index numbers.
(ii) A company manufacturing spare parts uses three main materials A, B and C. The table
below shows the price (in $) and the quantity used in each of the years 2001 and 2002.
A B C
Price Quantity Price Quantity Price Quantity
2001 1.25 4000 4.30 1000 2.30 2000
2002 2.60 2000 5.60 800 2.75 4000
(I) Calculate a current-weighted price index for 2002 with 2001 as base using the aggregative
method.
(II) Calculate a base-weighted quantity index for 2002 with 2001 as base using the aggrega-
tive method.
[3+3+3=9 marks]

[Total: 20 marks]

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 Quantitative Methods for Business-ECON 1003Y

QUESTION 6
(a) State the axioms of probability.

[2 marks]

(b) A company is conducting marketing research on three of its products A, B and C. A survey of 70
consumers gives the following results:
Out of the 39 customers who bought product A, 22 also bought product B but did not buy product
C. Out of the 43 consumers who bought B, 10 also bought both products A and C. Out of all
consumers who bought product C, 12 also bought A, 11 also bought B and 6 bought neither A
nor B.
(i) Represent the information on a Venn diagram.
(ii) Calculate the probability that a person selected at random from the surveyed consumers did
not buy product C.
[3+2=5 marks]
(c) 40 workers in an office can be classified as follows:

Clerical Administrative
Grade Grade
Male 4 6
Female 20 10

(i) Calculate the probability that a worker selected at random from the office is:
(I) from the administrative grade.
(II) from the clerical grade given that she is female.
(ii) Determine whether the events ”being female” and ”being from the clerical grade” are inde-
pendent events.
[1+2+2=5 marks]

(d) Each question on a multiple-choice test consists of 5 alternatives, out of which only one is correct.
A student either knows the answer or guesses. Suppose that the probability that the student
knows the answer to a question is 0.5. Use Bayes’ Formula to calculate the conditional probability
that the student knew the answer given that she answered it correctly.

[5 marks]

(e) A firm has agreed to accept delivery of a component shipped in batches of 1500 if, in a ran-
dom sample of ten, no more than one component is defective. What is the probability that this
acceptance sampling rule would lead to a batch with 300 defective items being accepted?

[3 marks]

[Total: 20 marks]

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 Quantitative Methods for Business-ECON 1003Y

QUESTION 7

(a) (i) Explain what you understand by the “memoryless property of the exponential distribution.”
(ii) Suppose that the amount of time (in minutes) a customer spends in a bank is exponentially
distributed with λ = 0.1. Calculate the probability that a customer will spend more than 15
minutes in the bank given that she is still in the bank after 10 minutes.
[2+3=5 marks]

(b) (i) Define the term “sampling distribution of the sample mean.”
(ii) State clearly the Central Limit Theorem for the sample mean.
(iii) An automatic machine fills packets of chips with a mean net weight of 350 grams and a
standard deviation of 8 grams. The random variable X̄ denotes the mean mass (in grams) of
chips per packet in a random sample of 40 packets. Find the value of a such that

P (|X̄ − 350| < a) = 0.96

[2+2+4=8 marks]

(c) A survey of 500 randomly selected shoppers at a shopping mall showed that 350 of the customers
paid for their purchases using credit cards while the remaining customers used cash.

(i) Calculate a 98% confidence interval for the proportion of all persons at the mall who use
credit cards for shopping.
(ii) Interpret the confidence interval.
[5+2=7 marks]

[Total: 20 marks]

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 Quantitative Methods for Business-ECON 1003Y

QUESTION 8

(a) A machine is set to cut metal rods to a length of 8.75 cm. It is felt by the operator that the rods
being produced are too short. The hypothesis is to be tested at the 1% level of significance.
∑
A
i (xi −x̄)
2
2
random sample of 8 rods gave a sample mean length of x̄ = 8.6 and a variance of s = n
=
0.045. What conclusion can be drawn on the basis of the sample?

[6 marks]

(b) Two random samples, each of size 10, are drawn from two populations of children. Each group is
administered a different diet and the increases in weight due to the diets are recorded in the table
below.

Group I 8 5 7 8 3 2 7 6 5 7
Group II 3 7 5 6 5 4 4 5 3 6

It is desired to carry out a test of equality of means using an “independent samples” t-test. One
of the assumptions of this test is the assumption of homogeneity of variance. Test, at 2% level of
significance, whether the above assumption holds.

[7 marks]

(c) The table below gives the number of employees absent for a single day during a particular period
of time:

Day Monday Tuesday Wednesday Thursday Friday

Number of Absentees 117 87 85 95 116

The manager believes that the number of absentees is independent of the day of the week. Test,
at 5% level of significance, whether this belief is supported by the data.

[7 marks]

[Total: 20 marks]

End of examination paper.

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 Quantitative Methods for Business-ECON 1003Y

BASIC FORMULAE

These formulae are supplied for assistance only. Their use is NOT compulsory.

ARITHMETIC MEAN
∑
xi
Ungrouped : x̄ =
∑n
fi xi
Grouped : x̄ = ∑
fi

STANDARD DEVIATION
√∑ √∑ ( ∑ )2
(x − x̄)2 x2i xi
Ungrouped : s = = −
n n n
√∑ √∑ (∑ )2
fi (xi − x̄)2 fi x2i fi xi
Grouped : s = ∑ = ∑ − ∑
fi fi fi

EXPONENTIAL P.D.F {
λe−λx , x ≥ 0;
f (x) =
0, otherwise.

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