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B.A. FIRST SEMESTER EXAMINATIONS: 2013/2014 _

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ECON 315: APPLIED MATHEMATICS FOR ECONOMISTS (3 Credits) {

ANDANY
INSTRUCTION: ANSWER THREE QVUESTIONS ·IN ALL, QUESTION ” ONE
’
OTHER TWO . - .~
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TIME ALLOWED: TWO ANDA HALF (2%) HOURS ·

i
Question One (COMPUIQSORY) _ (40 marks)
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A consulting firm for a manufacturing company arrived atthe following Cobb-Douglas

‘
production function for a particular product: .

' Where, x is the {number of units of{labour and y is the number of unitsof capital required
to produce N (x, y) units of the product. Eachunit of labour costs $40and each unit of ”
capital costs $80. If $400,000 is budgeted for the production of the product,

i. Determine how this amount should be allocated at the optimum. .

”
ii. Confirm that this allocation = occurs at the maximtun level and find the
l
maximum production level { { _ _
{ -

iii. Find the marginal uproductivity of money in this case, and estimate the
‘·
increase in production if an additional $80,000 is budgeted for the production .
_
of this product.
l
iv. Determine the {marginal rate of technical substitutions of x for y (MRTSXY) at
‘ V ” °
the maximum production level. {

0l F
Examirzer: Dr. E. Osei-Assibey ·
Page 1 of 4
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v. Given the maximum input x, determine the Output Elasticity of input x

_ vi. Show that for a Cobb-Douglas production function, as in the above, the
G ” ’
_ Elasticity of(Substitution (6) is equal to one. . .

_;
—Vx·
Vxyyx *2YX(2Vy
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Question Two l _ (30 marks)
l
A sportswear company’s weeklyimarginal cost of producing x pairs of tennis shoes is

500 » *
·"‘C , .
-/ (X) .=12*+ · "
x+1 .
Where, C(x) is cost in dollars.
And the weekly marginal revenue from the sale of x pairs of tennis shoes is given by

R '(Jc) = 40 — 0.0Z_x _—l- E R(0) = 0 Where, R(x) is revenue in

* dollars. Find the revenue function. _ . ~
l
’ in Vi i
i. If the fixed costs are $2,000 per week, find the cost function.

ii. What is the average cost per pair of shoes if 1,000 pairs of shoes are produced
each week?

iii. Find the revenue from the-sale of 1,000 pairs of shoes.

li ” ‘ Z P
iv. Determine the profit maxmzrings output *

v. Determine the profit function and the level of profit at the profit maximizing
output.

' (30 marks)

Question Three
A) Suppose the_ price P(t) of a particularrcommodity varies in such a way that its rate of
— ZP;
change is proportional to the shortage (D-S), where D ·= 14 S =

Z + ZP are the demand and supply ftmctions respectively for the commodity.

i) 0, price was $12 , and at the time t = 4,

Find P(t” ), if at the initial time t =”·
price was‘$8· ·~
‘ ‘ * ’·

A P P l Z
Examiner: Dr. E. Osei-Assibey J '
Page 2 of4 4
 ii) Show that as t increases without bound, P(t) approaches the price vliliére
HVERSFTV
supply (S) equals demand (D) _

B) Solve the equation below using. the; general Jformula for a· general solution for
.dy
Differential Equations: — _ J „
_ _
2 + 6ty — 12t y(0) — l
dt 4
·” ” °”
Check your answer·„.” ·°
ui ·” ll l i _- in
=k4Y3t2·lrf3i _ _
nhC)
Givenafunction‘F(}/,t) -

i) Find the total differential of the function and show that it is exact
1
ii) Solve the exact differential equation by the four-step procedure

i. _ _ (30 marks)
__
Question Four J J ·. . J J J J
A) Given the following data on consumption, investmentV and initial income for a small
closed economy without govermnent intervention

„ C, = 200 + 0.3Y,+0.175Y,-1
V
l-C
Find the time path of national income (Y,)
JJi) = ·· ·
l l
S
ii) Check your answer using t=0, t=l

iii) Comment on the stability of the time path.

B) If the market demand for oranges is given as ·”Qd, = ZOO + O.ZP, . And the supply of
l “ ” his V ” i F ° V F V
oranges given J by
QS, = -].00 + 0.4]),-1 Where, the initial price, PO = 400

Determine, _
i) the market price P, in any time period
l l
ii) check your answeruusing t=0, t=l J
.

iii) the equilibrium

Dr. E. Osei-Assibey
priceExamirzer:
Page 3 of 4
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. iv) the stability- of the path -

V A I
. I
Question Five · (30 marks)
A furniture producing company has two plants that produce the lumber used in
manufacturing tables and chairs. In 1 dayuof operation, plant A can produce the lumber
required to manufacture tables and 60 chairs while plant B can produce the lumber
required to manufacture 25 tables and 50 chairs. The company needs enough lumber to
manufacture at least 200 tables and 500 chairs..If it costs $1000 to operate plant A for 1
day and $900 to operate plant B for l day, . -

i) Sumrnarize the relevant materials in a table form; identify the decision variable,
objective function and problem constraints functions.

ii) Graph the feasiblelregion, showing coordinates of all the comer points

iii) How many days- should each be operated in order to produce a Asufticient
amount of lumber at a minimum cost. VVhat is the minimum cost'?

iv) Discuss the effect on the operating schedule and the minimum cost if the daily
cost of operating Plant A is reduced to $600 and all other data in part (B) remain
‘ « ._ _
thesame,.-_ ..

v) Discuss the effect on the [operating schedule and the minimumcost if the daily
cost of operating plant is reduced to $800 and all otherdata in part (A) remain
the same. -

Examirzer: Dr. E. Oséiékissibey

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