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Pxand: P Marks) X and (5 Marks) (3 Marks)

The document contains an exam for a course in applied mathematics for economists. It includes 4 questions: 1) A constrained utility maximization problem, finding demand functions and calculating optimal bundles. 2) A linear programming problem to maximize profit from radio and calculator production given resource constraints. 3) Calculating the price of a phone 10 years in the future given an initial price and annual price increase rate. 4) A supply and demand model for potatoes to find the time path of prices after an initial surplus, and whether prices may stabilize in the long run.

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33 views2 pages

Pxand: P Marks) X and (5 Marks) (3 Marks)

The document contains an exam for a course in applied mathematics for economists. It includes 4 questions: 1) A constrained utility maximization problem, finding demand functions and calculating optimal bundles. 2) A linear programming problem to maximize profit from radio and calculator production given resource constraints. 3) Calculating the price of a phone 10 years in the future given an initial price and annual price increase rate. 4) A supply and demand model for potatoes to find the time path of prices after an initial surplus, and whether prices may stabilize in the long run.

Uploaded by

Bright Koranteng
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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UNIVERSITY OF GHANA

(All rights reserved)

B.A. FIRST SEMESTER EXAMINATIONS: 2016/2017

ECON 305/315: APPLIED MATHEMATICS FOR ECONOMISTS (3 Credits)


INSTRUCTION: ANSWER ANY THREE QUESTIONS
TIME ALLOWED: TWO (2) HOURS
Question One

Consider a consumer who consumes two goods (X and Y) and maximizes the following utility
function: U= SX0 25 yQ.7S. If Pxand Py are the prices of the commodities and M is his income:
i. Write down the first-order conditions for this constrained optimization problem. (5 marks)
ii. Write down the Marshallian demand functions for X and Y in terms of Px , Py and M (10
marks)
iii. Let P x =¢2S, Py =¢SO and M=¢400. What are the utility maximizing bundle of X and Y? (5
marks)
iv. Calculate and interpret the value of the Lagrange multiplier at the optimum in (iii) above
(3 marks).

Question Two

A company manufactures radios and calculators. The radios contribute Gh¢ 10/unit and calculators
Gh¢ IS/unit to profit. Each radio requires 4 diodes and 4 resistors, while each calculator requires
10 diodes and 2 resistors. A radio takes 12 minutes whilst a calculator takes 9.6 minutes of time
on the company's electronic testing machine and product manager. Estimates show that there is
160 hours of test time available and the company has 800 diodes and 300 resistors in stock.

a) Formulate the problem as a linear programming problem (hint: construct an input data
table) (5 marks)
b) Using the graphical approach find the optimal quantity of radios and calculators that
maximises the company's profit. (15 marks)
c) What is the maximum profit? (3 marks)

Question Three
The price P(t) of a certain phone is currently (t=0) GHC 30 . It is estimated that after t years, the
price P(t) will be increasing at a rate of 8P(t) -12t cedis per year. How much will the phone cost
10 years from now? (23 marks)

Examiner: Dr. D. K Twerefou


Question Four

Potato fanners had a good harvest in the year 2000 which caused the price of potatoes to fall
significantly due to excess supply. Economists have predicted that this will have a great effect on
the supply of potatoes the following year and hence the price. The demand and supply of
potatoes in the year 2001 is given as follows:

Qdt =160-0.8p'

a) Find the time path ofthe price of potatoes at any point in time p, if the initial price
Po =153. (12 marks)
b) Check your solution using t=2 and t=3 . (4 marks)
c) Estimate the difference in price between the third and fourth years. (4 marks)
d) The government is concern about whether in the very long run it is possible for price to
stabilize, as an economist, what is your view? (3 marks)

Examiner: Dr. D. K Twerefou

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