QUANTITATIVE METHODS FOR BUSINESS (ACCN102)

TUTORIAL SHEET 2
ATTEMPT ALL QUESTIONS GUIDED BY THE TEXT BOOK BY IAN
JAQES, THE CHAPTERS AND PAGE NUMBERS ARE ALSO GIVEN
SUPPLY AND DEMAND ANALYSIS CHAPTER 1.3 from Page.47-65
QUESTION 1

a. The demand and supply functions of a good are given by

Qd =2Qd 50; Qs 0.5Qs 25 where P, Qd and Qs denote the price,
quantity demanded and quantity supplied respectively.
i. Determine the equilibrium price and quantity.
ii. Determine the effect on the market equilibrium if the government decides to
impose a fixed tax of $5 on each good.
b. The demand and supply functions of a good are given by
P 4Qd 120; P 0.3Qs 29 where P, Qd and Qs denote the price,
quantity demanded and quantity supplied respectively.
i. Calculate the equilibrium price and quantity.
ii. Calculate the new equilibrium price and quantity after the imposition
of a fixed tax of $13 per good. Who pays the tax?

MATHEMATICS FOR FINANCE: CHAPTER 3, from page 177

QUESTION 2
a. An investment rises from $2500 to $3375. Express the increase as a percentage
of the original.
b. At the beginning of a year, the population of a small village is 8400. If the
annual rise in population is 12%, find the population at the end of the year.
c. In a sale, all prices are reduced by 20%. Find the sale price of a good
originally costing $580.
d. The value of a car depreciates by 25% in a year. What will a car, currently
priced at $43 000, be worth in a year’s time?

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e. After a 15% reduction in a sale, the price of a good is $39.95. What was the
price before the sale began?
f. The number of passengers using a rail link fell from 190 205 to 174 989. Find
the percentage decrease.

QUESTION 3
a. Table below shows the values of household spending (in billions of dollars)
during a 5-year period. Calculate the index numbers when 2017 is taken as the
base year and give a brief interpretation.

Year 2015 2016 2017 2018 2019

Household 686.9 723.7 697.2 716.6 734.5
spending

b. Use the index numbers listed in the table below to find the percentage change
in output from first quarter 2004 to 2005 fourth quarter.

Output 2004Q1 2004Q2 2004Q3 2004Q4 2005Q1 2005Q2 2005Q3 2005Q4

Index 89.3 98.1 105.0 99.3 100 106.3 110.2 105.7

i. 05Q1 to 05Q4 ii. 04Q1 to 05Q4 iii. 04Q1 to 05Q1

COMPOUND INTEREST; from page 194

QUESTION 4
a. Find the value, in 4 years’ time, of $10 000 invested at 5% interest
compounded annually.
b. A principal of $25 000 is invested at 12% interest compounded annually. After
how many years will the investment first exceed $250 000?
c. A principal of $2000 is invested at 10% interest compounded continuously.
After how many days will the investment first exceed $2100?

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d. Determine the future value of $30 invested at 6% interest compounded
continuously for 2 years.
e. A firm decides to increase output at a constant rate from its current level of 50
000 to 60 000 during the next 5 years. Calculate the annual rate of increase
required to achieve this growth.

INVESTMENT APPRAISAL: from page 220

QUESTION 5
a. A project requiring an initial outlay of $15 000 is guaranteed to produce a
return of $20 000 in 3 years’ time. Use the
i. net present value
ii. Internal rate of return methods to decide whether this investment is
worthwhile if the prevailing market rate is 5% compounded annually.
Would your decision be affected if the interest rate were 12%?
b. Suppose that it is possible to invest in only one of two different projects.
Project A requires an initial outlay of $1000 and yields $1200 in 4 years’ time.
Project B requires an outlay of $30 000 and yields $35 000 after 4 years.
Which of these projects would you choose to invest in when the market rate is
3% compounded annually?
c. A firm needs to choose between two projects, A and B. Project A involves an
initial outlay of $13 500 and yields $18 000 in 2 years’ time. Project B requires
an outlay of $9000 and yields $13 000 after 2 years. Which of these projects
would you advise the firm to invest in if the annual market rate of interest is
7%?

DIFFERENTIATION from page 262

QUESTION 6
a. If the demand function is P 60 Q, find an expression for TR in terms
of Q.

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 i. Differentiate TR with respect to Q to find a general expression for
MR in terms of Q. Hence, write down the exact value of MR at Q
50.
ii. Calculate the value of TR when (a) Q 50 (b) Q 51

b. If the total revenue function of a good is given by 1000Q 4Q write down
an expression for the marginal revenue function. If the current demand
is 30, find the approximate change in the value of TR due to a
i. 3 unit increase in Q
ii. 2 unit decrease in Q
c. A Cobb–Douglas production function is given by 𝑄 = 5𝐿0.5 2𝐾 0.5
Assuming that capital, K, is fixed at 100, write down a formula for Q in
terms of L only. Calculate the marginal product of labour when
i. L 1, ii. L 9 iii. L 10 000

PARTIAL DIFFERENTIATION from page 356

QUESTION 5
a. Given the demand function Q 100 -2P PA 0.1Y where P 10, PA 12
and Y 1000, find:
i. Price elasticity of demand
ii. cross-price elasticity of demand
iii. Income elasticity of demand
b. Given the production function 𝑄 = 𝐾 2 + 2𝐿2 , write down expressions for
the marginal products and the marginal rate of technical substitution
(MRTS)

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