UNIVERSITY EXAMINATION 2017/2018

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

BEC/BSFS
REGULAR

UNIT CODE: BED2119 UNIT TITLE: MATHEMATICS FOR

ECONOMICS II

DATE: AUGUST 2018 SPECIAL/SUPPLEMENTARY TIME:2 HOURS

INSTRUCTIONS: ANSWER QUESTION ONE AND ANY OTHER TWO QUESTIONS

1. a) Find the critical value of Z for the following optimization problem:(4 Marks)

Optimize Z=3x2+2y2
Subject to: x+y =8

b) Determine the second order partial derivative of

i) F (x1x2x3) =2x13+5x1x22+X43 (3 Marks)

X 2  18
ii) F (x1x2) = (3 Marks)
X 1X 2

c) For the following function

1 5
y= X3- X2+6X
3 2
i) Find the critical values (2 Marks)
ii) Determine the point where the function attains maximum or minimum
(4 Marks)

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 iii) Determine the extreme values (2 Marks)
iv) Find d2y for y=X1X22+X32. (4 Marks)

d) The production function for a firm is: Q=200-L2-K2

and the corresponding cost function is: C=2L+3K
If the firm wishes to maximise it output for a specified level of output C=30

i) Write the maximization problem for the firm. (2 Marks)

ii) Find the level of K and L for which Q is maximized. (2 Marks)
iii) Is the second order condition satisfied (2 Marks)
iv What is the maximum Q (2 Marks)

2. a) Consider the following market model:

QD=a1-a2P a1,a2 >0

Qs=a3+a4P a3, a4>0

i) Determine the equilibrium price and quantity. (2 Marks)

ii) Analyze the comparative static characteristics of equilibrium price and find
out whether your results are consistent with graphical analysis.(4 Marks)

iii) Analyse the comparative static characteristics of Q withy respect to a1 and

a4. (4 Marks)

b) Determine the four partial elasticities for the pairs of demand function given
below, and state whether the commodities concerned are substitutes or
complements, given that Q1,Q2,P1,P2>0

i) Q1=3-P1-P2
Q2=16-4P1-3P2 (5 Marks)

ii) Q1=3
PI2P22 (5 Marks)

Q2=1
P1P2

3. a) Demonstrate the Euler’s theories for the following production function

i) Q=7K3-2KL2-L3 (5 Marks)
1
ii) Q=AK2L- 3 (5 Marks)

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 b) Find the second order total differential for:

i) f(x1x2)=√(x1+5x2) (5 Marks)
ii) f(x1x2)=x2(x12+3) (5 Marks)

4. a) Consider the problem

Maximize Q=AL∝Kβ
Subject to:C=wL+-rK

i) Find the least cost, factor combination K/L for the problem. (6 Marks)

ii) Show that for outpu Q to be maximized, the ration of factors prices must
equal the ratio of marginal products of the factors. (4 Marks)

b) You are given the following information about the firm

P=4-¼Q
4
ATC=0.05Q2-0.3Q+2+
Q

i) The output level which will maximize the profits of the firm. (2 Marks)

ii) The output level which will maximize the profit of the firm if a lump tax of
K is imposed. (4 Marks)

iii) Explain your answer in (ii) above. (2 Marks)

iv) Find the profit maximizing Q if a subsidy of 2 per unit is imposed on

quantity produced. (2 Marks)

5. Determine the second order partial derivatives of

i) f(x1x2) =(2x12-3x22)3 (5 Marks)

ii) f(x1x2)=(x1+x2)2 (x1+7)3 (5 Marks)

b) Find the extreme points and points of inflexim for the following function:

i) Y=x3+6x2+9x+6 (5 Marks)
ii) Y=-x3+x2 (5 Marks)

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