BBAF 307: Managerial Economics

Assignment 1
Submission: 11th October 2023
1. An airline charges 3000 cedis for a flight of 2000km and 7000 cedis for a flight of
4000 km.
a. Plot these points on a graph paper with distance on the horizontal axis and cost on the
vertical axis.
b. Assuming a linear model, estimate
i. The cost of a flight of 3200 km;
ii. The distance travelled on a flight costing 4000 cedis

2. The number of people, N, employed in a chain of cafes is related to the number of

cafes, n, by the equation:
N=10n+120
a. Illustrate this relation by plotting a graph of N against n for 0 ≤ n ≤20 .
b. Calculate the number of
i. Employees when the company has 14 cafes;
ii. Cafes when the company employs 190 people

3. Monthly sales revenue, S (in cedis) and monthly advertising expenditure, A (in cedis),
are modelled by the linear relation, S=90000+12A.
a. If the firm does not spend any money on advertising, what is the expected
sales revenue that month?
b. If the firm spends 8000 on advertising what is the expected sales revenue?
c. How much does the firm need to spend on advertising to achieve a monthly
sales revenue of 150,000?
d. If the firm increases monthly expenditure on advertising by 1 cedi, what is the
corresponding increase in sales revenue?

4. The total annual sales of a book in either paper or electronic form are 35000. Each
paper copy of the book costs 300 cedis and each e-book costs 250 cedis. The total cost
is 975,000.
a. If x and y denote the number of copies in paper and electronic form, write
down a pair of simultaneous equation.
b. Solve the equations to find the number of e-books sold.
c. Graph the two equations on the same graph sheet and indicate the values of x
and y at the point of intersection.

5. Differentiate the following

a. the profit function π=– 2Q 3+15 Q2−24 Q−3
b. the total revenue function TR=50Q−3 Q2

(
2 2
c. the function x x + 2 x− 2
5
x )