BEEQ2013CONFIDENTIAL

@UUM
FINAL EXAMINATION
FIRST SEMESTER 20171 2018 SESSION
COURSE CODE/ NAME : BE-EQ2013 MATHEMATICAL ECONOMICS
DATE • 28/12/2017 (THURSDAY)
TIME • 2.30 - 5.00 ( 21/2 HOUR)

VENUE • DWN BKACHI

INSTRUCTIONS:

1 . This question paper contains SIX (6) questions in FOUR (4) printed page excluding the
cover page.
2. Candidates are required to answer ALL questions in the answer booklet.
3. The use of an electronic calculator is allowed.
4. Candidates are NOT ALLOWED to take both examination paper and the answer booklet
out of the examination hall.
5. Candidates are bound by the UUM'S RULES AND PROCEDURES ON
ACADEMIC FRAUD.

MATRIC NO..
( in words )
(in numbers )

IDENTIFICATION CARD NO..

LECTURER'S NAME

GROUP .
 BEEQ2013 ECONOMICS

DO NOT OPEN THIS EXAMINA TION PAPER UNTIL

INSTRUCTED
CONFIDENTIAL
MATHEMATICAL
MATRICNO..

QUESTION ONE (10 MARKS)

Given the supply and demand functions

= Q 2 + 14Q + 22 -P = O and = -Q 2 - 10Q + 150 -P = O,

where P = Price (in RM); Q Quantity (in a thousand).

a) Calculate the equilibrium price and quantity.

(5 marks)

b) Which curve will move when the price of the substitute goods falls? State the direction
of the movement of the curve as well as state its effect on the equilibrium price and
quantity.
(5 marks)

QUESTION TWO (11 MARKS)

Given a national income model as follows:

Y = C + 10 + Go, C = Co + bYd and T = To+ ty,

where Y = income; Yd disposable income; C consumption; autonomous consumption; 10 =
autonomous investment; Go = autonomous government expenditure; T Tax; To =
autonomous tax; b and t are coefficients.

a) Identify endogenous, exogenous variables, and parameters in the system of equations.

(3 marks)

b) Find the equation for the equilibrium level of income in the reduced form.
(5marks)

c) Calculate the equilibrium level of income where Co = 200; b = 0.8; To = 40, t = 0.25; =
250; Go = 300.
(3marks)

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 BEEQ2013 ECONOMICS MATRIC NO.

QUESTION THREE (13 MARKS)

a) Given the following set of simultaneous equations for two related markets;

Qdx= - and Qsx - 60 + 3Px

Qdy = 295 -PX - 3Py and Qsy - 120 +20,
where; Qdx and Qsx are demand and supply for goods x in a thousand. Qdy and Qsy are
demand and supply for goods y in a thousand; PX and Py are price for commodity x and
y in Ringgit Malaysia (RM).
Find the equilibrium price and quantity by matrix inversion technique.
(6 marks)
MATHEMATICAL
b) Given the coefficient matrix (A),
economy, respectively, as
and the final demand vector (d) of a hypothetical
0.3
A 0.5 0.2
0.1 0.3 0.1 20 0.6 and d = 10 , 0.1 30

determine the level of output for the economy.

(7 marks)

QUESTION FOUR (15 MARKS)

a) Find the total derivative of the following functions:
1 2 .y + I
i) with respect to t, given x = t, y = 2 t
(3 marks)

In(X 2 + y 2 ) —

(2 marks)

b) Find the following integral:

i) X 2 e x dx.
(5 marks)
2

If net investment (millions of RM per year) is a non-constant flow, I(t) = 5t; what will be the
capital formation during the interval [0,5] and the time path of capital stock, K (t),
given K (0) = 25?
(5 marks)

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 BEEQ2013 ECONOMICS
QUESTION FIVE (21 MARKS)
a) Given model of a process of money supply in an economy as M — cu+x
H (i — i d )) where cu is the currency deposit ratio i.e cu = currency, x is the required reserve
deposit required reserve
ratio i.e x — F denotes net foreign assets, G, net government borrowing, H, deposit
net borrowing by commercial banks, i is market interest rate, and i d is the central bank's discount
rate.

i) State and explain the economic meaning of the term cu+l

cu+x

(4 marks)

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 BEEQ2013 ECONOMICS MATRIC NO.
MATHEW TICAL

iii) Derive the effects of the central bank's policy instruments, in particular, if the
required reserve ratio is increased, on money supply.
(5 marks)
b) Consider the simple demand and supply of a particular commodity as follows:

Dp < o,DY > O

QS = SCP, R), sp > o,SR < O
where Q, P, Y, R are respectively, quantity demanded, quantity supplied, price, income,
and the price of a resource, say oil, used in the production of the good.

i) Express the demand and the supply equations above in their implicit version.

(2
marks)
ii) Now, given the equilibrium condition Q D = Q S Q, and using the simultaneous-
equation approach for the implicit, evaluate the effect of an increase in the price
of oil (R) on the quantity and price of the good in the market. Show all the steps.

(10 marks)

QUESTION SIX (30 MARKS)

a) A firm is a monopolistic producer of two goods. The prices are related to quantities QI and
Q2 according to the demand functions PI = 50 — QI and P2 = 95 — 3Q2. If the total
cost function is TC = Q12 + 3QIQ2 + Q2,

i) Find the firm's total revenue function.

(3
marks)

Find the firm's total profit function.

(3
marks)

iii) Calculate the values of QI and Q2 which maximize profit.

(5
marks)

iv) Using the second order condition (SOC), prove that the profit level is at a
maximum.

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 BEEQ2013 ECONOMICS MATRIC NO.
(5
marks)

b) An individual's utility function is given by U(x1x2) = 2x1x2 + 3x1, where Xl and x2

denote the number of item of two goods. The prices of the goods are RMI and RM2,
respectively. Assume that the individual has RM83 available to spend on these goods.

i) Find the budget constraint.

(2 marks)

MATHEW TICAL

ii) Find the utility-maximizing values of Xl and x2 using the Lagrange Multiplier
Method.
(7 marks)

iii) Prove that the individual's utility is at a maximum by bordered Hessian.

(5 marks)

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 BEEQ2013 ECONOMICS MATRIC NO.
END OF QUESTIONS