Task of Mathematics for Economics and Bussiness

Exercise 1 and 2 Chapter 4

Name : Anifa Mirza Liadiani

Student ID : 4101417081

Exercise 1
1. Explain the definition of :
a. Marginal revenue
b. Marginal cost
c. Elasticity

2. Determine the partial elasticity for each pair of demand function as follow.
𝑎 𝑎
𝑥 = 𝑝2 𝑞 and 𝑦 = 𝑝𝑞 for 𝑎 > 0.

Solution
1. The definition are as follow.
a. Marginal revenue
Marginal revenue is the amount of change at receipt if the producer sells one
additional unit of output or goods.
b. Marginal cost
Marginal costs (marginal cost = MC) are additional costs issued to produce one
additional unit of output.
c. Elasticity
Elasticity can be defined as the percentage change in the dependent variable
divided by the percentage changes in independent variables. In general, people
desire things less as those things become more expensive. However, for some
products, the customer's desire could drop sharply even with a little price increase,
and for other products, it could stay almost the same even with a big price
increase.
2. The elasticity of first product:
𝑎 −2𝑎
𝑥= 2
⇒ 𝑥′ = 3
𝑝 𝑞 𝑝 𝑞
−2𝑎 𝑝
𝜂= ∙
𝑝3 𝑞 𝑎
𝑝2 𝑞
−2𝑎 𝑝2 𝑞
⇔ 𝜂 = 3 ∙𝑝∙
𝑝 𝑞 𝑎
⇔ 𝜂 = −2
We get |𝜂| = 2.
It means, the quantity of first product that is demanded will increase in the amount of
200% if the price of the first product is decrease in the amount of 100%.
The elasticity of second product:
𝑎 −𝑎
𝑦= ⇒ 𝑦′ = 2
𝑝𝑞 𝑝 𝑞
−𝑎 𝑝
𝜂= 2 ∙ 𝑎
𝑝 𝑞
𝑝𝑞
−𝑎 𝑝𝑞
⇔ 𝜂 = 2 ∙𝑝∙
𝑝 𝑞 𝑎
⇔ 𝜂 = −1
We get |𝜂| = 1.
It means, the amount of the quantity of second product that is demanded will increase
same with the amount of the price of the second product that is decrease.
Exercise 2
1. Explain the definition of :
a. Price Elasticity of Demand
b. Cross Elasticity of Demand
c. Production Elasticity

2. Determine the partial elasticity for each pair of demand function as follow.
𝑥 = 𝑎𝑒 −𝑝𝑞 and 𝑦 = 𝑏𝑒 𝑝−𝑞 for 𝑎 > 0, 𝑏 > 0.

Solution
1. The definition is as follow.
a. Price Elasticity of Demand
Price elasticity of demand is the elasticity that is a sensitivity of changes in the
quantity of demand. The item is related to changes in the price of the item in
question.
b. Cross Elasticity of Demand
Cross elasticity of demand is an elasticity that measures the sensitivity of a change
in demand goods relating to changes in prices of other goods.
c. Production Elasticity
Production elasticity is elasticity that measures the sensitivity of a production
change goods are related to changes in inputs used to produce these items.

2. The elasticity of first product:

𝑥 = 𝑎𝑒 −𝑝𝑞 ⇒ 𝑥 ′ = 𝑞𝑎𝑒 −𝑝𝑞
𝑝
𝜂 = 𝑞𝑎𝑒 −𝑝𝑞 ∙ −𝑝𝑞
𝑎𝑒
⇔ 𝜂 = 𝑝𝑞
We get |𝜂| = |𝑝𝑞 |.
The elasticity of second product:
𝑦 = 𝑏𝑒 𝑝−𝑞 ⇒ 𝑦′ = 𝑏𝑒 𝑝−𝑞
𝑝
𝜂 = 𝑏𝑒 𝑝−𝑞 ∙ 𝑝−𝑞
𝑏𝑒
⇔𝜂=𝑝
We get |𝜂| = |𝑝|.