Bed2110 2124 Mathematics For Economist I Reg Supp

UNIVERSITY EXAMINATION 2017/2018
SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS
BECS/BECF/BEC
REGULAR
UNIT CODE: BED2110/2124 UNIT TITLE: MATHEMATICS FOR ECONOMIST

I
DATE: AUGUST 2018 SPECIAL/SUPPLEMENTARY TIME:2 HOURS
INSTRUCTIONS: ANSWER QUESTION ONE AND ANY OTHER TWO QUESTIONS
1. a) An individual has the following consumptions function; C=∝O+∝,Y
i) Determine the corresponding marginal propensity to save (2 Marks)
ii) If the individual saves shillings when his income is zero, determine the
corresponding savings functions; (2 Marks)
4 x1  5 x2  2 x3  18
b) Solve by matrix inverse; x1  x2  x3  4 (4 Marks)
9 x1  11x2  5 x3  20
c) The demand and average total costs facing a firm are given below;
3
P  6 Q
5
2
ATC  Q   3Q
5
i) Determine the level of Q when profit equal zero. (2 Marks)
ii) Determine the marginal profit function. (2 Marks)
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d) Given the following average revenue and total cost functions,
AR1  6  Q1  3Q2
AR2  2  4Q1  Q2
1
TC  2Q12  3Q1Q2  Q22
2
Determine the corresponding profit function. (4 Marks)
e) You are given the following production function where Q is output L and K are
respectively labour and capital inputs and A, ∝ and β are constants. Q=AK∝LB
i) Determine the average product of labour and the average product of capital
(2 Marks)
ii) Express MPL in terms of Q, L and β (2 Marks)
iii) Determine MPk (2 Marks)
f) The demand function for source product is given by; P  4 14  Q 

1
3
Find;
i) The TR function (2 Marks)

ii) The MR function (4 Marks)
iii) The value of Q for which MR is zero (2 Marks)
2. a) The money market of an economy is given by the following equations;

MDT  1 Y
2
MDS  100  10r
i) Derive the LM function for the economy (2 Marks)
ii) Find the equilibrium r when Y=3000 (2 Marks)
b) The demand function for a commodity is P=50-0.5q

The cost of producing a commodity is made up of a fixed cost of 200 shillings
and variable cost of 0.2 shillings per unit.
i) Find the profit function for the commodity (6 Marks)
d
ii) Determine the output at which 0 (4 Marks)
dQ
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C    Y d
c) For the following consumption and tax functions where Y d  Y  T
T  tY
i) Express C as a function of Y (2 Marks)
ii) Find the level of C when Y=0 (2 Marks)
iii) Find the level of C when Y=500, ∝=50, β=0.8 and t  1 (2 Marks)
4
3. a) Consider the following two commodity market model;
QD1  8  2 P1  P2
QS 1  5  3P1
QD 2  16  P1  P2
QS 2  1  2 P1
Determine by Grauness rule;
i) The value of equilibrium price (6 Marks)
ii) The value of equilibrium quantity (6 Marks)
b) The demand and average total cost functions of a firm are given by the
3
P  6 Q
4
following expression;
2 5
ATC  Q  
5 Q
i) Determine the total revenue and total cost function for the firm. (4 Marks)
ii) Determine the corresponding profit function (2 Marks)
iii) Determine optimal value of output (2 Marks)
1  2  3
4. a) Consider the following production function; Q  AX1 X 2 X 3
i) Determine the corresponding marginal products (6 Marks)
ii) Show that;  X ,  MPX1   X 2  MPX 2   X 3  MPX 3  (4 Marks)
Q=X(MPX1)+X2(MPX2)+X3(MPX3)
b) Consider a two commodity market model represented by;
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1
QD1  4  P1  P2
2
5 3
QS 1   P1
2 2
QD 2  8  2 P1  2 P2
QS 2  3  6 P2
Calculate equilibrium prices and quantities for the market (6 Marks)
c) Show the relationship between price elasticity of demand and marginal

revenue. (4 Marks)
5. a) You are given the following investment and import functions;

I  io  i, Y
M  a  by
i) Distinguish io , from  and i from b (4 Marks)
ii) Determine the levels of investment and imports when Y=0 (4 Marks)
b) Given the following average revenue and total cost functions;

AR  6  Q1  3Q2
AR2  2  4Q1  Q2
1
TC  2Q12  3Q1Q2  Q22
2
i) Determine the corresponding profit function (6 Marks)
ii) Determine the optimal output for each product that will maximize profit.
(6 Marks)
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UNIVERSITY EXAMINATION 2017/2018

SCHOOL OF BUSINESS AND ECONOMICS

UNIT CODE: BED2110/2124 UNIT TITLE: MATHEMATICS FOR ECONOMIST

DATE: AUGUST 2018 SPECIAL/SUPPLEMENTARY TIME:2 HOURS

INSTRUCTIONS: ANSWER QUESTION ONE AND ANY OTHER TWO QUESTIONS

1. a) An individual has the following consumptions function; C=∝O+∝,Y

i) Determine the corresponding marginal propensity to save (2 Marks)

Library Copy Page 1

ii) Express MPL in terms of Q, L and β (2 Marks)

iii) Determine MPk (2 Marks)

f) The demand function for source product is given by; P  4 14  Q 

i) The TR function (2 Marks)

2. a) The money market of an economy is given by the following equations;

b) The demand function for a commodity is P=50-0.5q

Library Copy Page 2

3. a) Consider the following two commodity market model;

b) Consider a two commodity market model represented by;

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c) Show the relationship between price elasticity of demand and marginal

5. a) You are given the following investment and import functions;

b) Given the following average revenue and total cost functions;

Library Copy Page 4

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