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ETF2700/ETF5970 Mathematics for Business

Semester 2 2016
Assignment 2 SOLUTIONS
Total marks: 19 + 17 + 15 + 29 + 15 + 4 + 21 + 13 = 133 marks

This assignment is based on the relevant unit material (lectures, tutorial exercises, prescribed reading,
prescribed Problems, etc). We expect that students who have not revised such material before attempting the
assignment will obtain VERY POOR marks (but, at least, they will know why they obtained poor marks).
This solutions document (with marking scheme) for the assignment is fairly comprehensive. Consequently,
the approach to providing feedback to students is not to write extensive comments on individual work,
because the detail is shown in the solutions document. However, if you require additional feedback (after
consulting the solutions document), please contact your tutor.
Square brackets [ ] placed around your work by the marker indicate sections that are not contributing to
your marks tally. This is
(a) a convenience to help the marker in allocating marks
and
(b) an indication to you of what is most relevant to the question that was asked.
(Often, such bracketed responses are correct statements, but do not address the question that was asked.)
Marks were based on the quality of answers, not just on the amount written.
Many marks were lost due to failure to answer the question which was asked, and MANY words were
written that did not answer the questions which were asked.
Marks were not awarded for the mere use of key terms, but for their appropriate use.
Where there are reasonable grounds for believing that plagiarism or collusion has occurred, this will be
reported to the Chief Examiner, who will disallow the work concerned by prohibiting assessment or refer the
matter to the faculty manager.
Graphs, tables, etc should be appropriately and informatively labelled, with chart titles, axis titles, legends,
etc as appropriate.
You have, at your disposal, MUCH, MUCH more computing power than was available to astronauts on the
first moon landing! So, its not unreasonable to ask for calculations accurate to the specified number of
decimal places.
The unit is called Mathematics for Business not Pure Mathematics. So, of course, you will need to
employ your English language skills in reading and in answering the questions. If you did not understand
what the question was asking, then you should have consulted a staff member.
If you still dont know how to do sub/superscripts in Word, you should refer to Tutorial 1.

SYW is an abbreviation for Show your working.

In an assignment, you can be asked to use software and to do more calculation/graphing/tabulation than you
would be asked to do in an exam. By contrast, an exam focuses more on understanding/explanation of the unit
material. So, if you performed poorly on the assignment tasks which required understanding/explanation, be
aware that you may be poorly prepared for the exam.

Show your working. (SYW)


Question 1

(a)

(i)

Ux = 500.5x

[(5+7.5+1) + (1+4.5) = 19 marks]


0.5 1

0.2

y = 25x

0.5

0.2

/1

Uy = 500.2x0.5 y0.2 - 1 = 10x0.5 y-0.8

/1

Uxx = 25-0.5x-0.5 1 y0.2 = -12.5x1.5 y0.2

/1

Uyy = 10-0.8x0.5 y-0.8 - 1 = -8x0.5 y-1.8


Uxy = 100.5x0.5 - 1y-0.8 = 5x-0.5y-0.8

/1

Uyx = 250.2x0.5y0.2 1 = 5x-0.5y-0.8

/1

It is sufficient to show only one mixed partial derivative - because they are equal.
(ii)

Utility U = f(x, y):


the level of utility (satisfaction) obtained from consuming goods X and Y.
x & y are the quantities consumed of goods X and Y; x, y > 0.
(Units of measure for x and y may be individual items or kg or litres, etc.)
For someone who is neither a mathematician nor an economist, explain
what information is provided by EACH of the derivatives which involves differentiation with
respect to x.
Ux = 25x0.5 y0.2 (marginal utility with respect to x)
Holding y (the consumption of good Y) constant,
Ux is the rate of change (slope of the utility curve) in utility
in response to an increase in the consumption of good X.

/0.5
/0.5
/0.5

Ux = 25x0.5 y0.2 > 0 because x and y > 0.

/0.5
So, as x (consumption of good X) increases, U (utility) also increases.
/0.5
Marginal utility is not an explanation. It is just a renaming of U x.
Ux: is NOT the rate of change in marginal utility per unit increase in x because a derivative
is based on infinitesimals. (Were not interpreting the slope of a linear equation here.)
If your answer is only expressed algebraically (eg, if y is held constantthe curve is
concave to the origin), then you are failing to provide information to a nonmathematician/economist.
Uxx = -12.5x1.5 y0.2
Holding y (the consumption of good Y) constant,
Uxx is the rate of change in Ux (see above)
in response to an increase in the consumption of good X.

/0.5
/0.5
/0.5

Uxx = -12.5x1.5 y0.2 < 0 because x and y > 0.

/0.5

So, as x (consumption of good X) increases, the marginal utility function with


respect to decreases.
That is, as x (consumption of good X) increases, utility increases as well, but at a
decreasing rate.
(Equivalently, U = f(x, y) is concave downwards.)

/1

Uxy = Uyx = 5x-0.5y-0.8


The following discussion may be repeated with x and y substituted for each other.
However, it is sufficient to discuss only one mixed partial derivative.
Uxy is the rate of change in Ux (see above)
in response to an increase in the consumption of good Y.
-0.5 -0.8

Uxy = 5x y

> 0 because x and y > 0.


So, as y increases, the marginal utility with respect to x increases.
Rate of change of the slope in the x-direction as one moves into the y direction.

(iii)

(b)

/0.5
/0.5
/0.5
/0.5

This question has nothing to do with the slope of indifference curves.


This question has nothing to do with labour or capital or revenue. (Its about utility.)
U = 50x0.5y0.2 does not have a maximum. Holding y constant, as x increases, U increases.

As x increases (y held constant),


Ux is decreasing because Uxx < 0. [See (a)(ii).]
As y increases (x held constant),
Uy is decreasing because Uyy < 0. [See (a)(ii).]

Q = 100L0.5 K0.5

/0.5
/0.5

(i)

(ii)

Q = 100L0.5 K0.5 has the form Q = ALK, where = = 0.5.


Because + = 1, the production function has constant returns to scale.
[Lecture 6, Slide 27.]

QL = 1000.5 L0.5 - 1 K0.5 = 50 L-0.5 K0.5


QLL = 50-0.5 L-0.5 - 1 K0.5 = -25 L-1.5 K0.5

/1
/1

L and K > 0 because they are the amounts input of labour and capital.
QL > 0 because L > 0 and K > 0.
So, as L increases, (K being held constant) production function Q increases.
QLL < 0 because L > 0 and K > 0.
So, as L increases (K being held constant), QL decreases.
ie, as L increases (K being held constant), Q increases, but at a decreasing rate.
So, the production function exhibits diminishing returns to labour.
Show your working. (SYW)
Question 2
(a)

(i)

y = -2x + 18x

/1

/0.5
/0.5
/0.5
/0.5
/0.5

[(3+10) + 4 = 17 marks]
2

Shape
/1
x-axis label
/0.5
y-axis label
/0.5
Domain includes -5 x 10
/0.5
Correct numbers shown on both axes
/0.5
(The graph should be smooth, not a succession of line segments.)
(ii)

y = -2x3 + 18x2
y = -6x2 + 36x
y = -12x + 36
1st derivative = 0
y = 0 when -6x2 + 36x = 0,
ie, when 6x(x 6) = 0
x=0
or x = 6.
At x = 0,
y = -2x3 + 18x2
=0
y = -12x + 36
= -12*0 + 36
So, there is a minimum at (0, 0).

/1
/1

/0.5
/0.5
/0.5

= 36 > 0

/0.5
/0.5
/0.5

At x = 6,
y = -2x3 + 18x2
= -2*63 + 18*62 = 216
y = -12x + 36
= -12*6 + 36 = -36 < 0
So, there is a maximum at (6, 216).
2nd derivative = 0
y = 0 when -12x + 36 = 0 12x = 36 x = 3.
At x = 3, y = -2x3 + 18x2 = -2*33 + 18*32 = 108.
Check:
at x = 2.95,
y = -12*2.95 + 36 = 0.6
at x = 3.05,
y = -12*3.05 + 36 = -0.6
y changes sign around x = 3.
So, there is a point of inflection at (3, 108).
[Lecture 5 Slide 37 seems to have been invisible to many students.]
[FYI: at a point of inflection, if y 0, then it is a stationary point of inflection.]
(b)

/0.5
/0.5
/0.5
/1
/0.5
/0.5
/0.5
/0.5
/0.5

Julia was reporting on recent movements in the stock market.


Presumably she was reporting on
a time series such as the ASX200 index.
a time series which would be graphed with the index (y) on the vertical axis and time (t) on the
horizontal axis. Moving forward in time corresponds to rightwards movement in the graph.
movements over, say, the last few weeks or months - rather than long-term behaviour. At the time
that she was speaking, the behaviour of the series prior to the inflection point would be historical
knowledge.
What Julia was saying
Were at an inflection point and no-one knows where were going from here.
If Julia used standard mathematical concepts and was describing the behaviour of y (q.v.)
Sketches A and B below depict two of the four possible situations where there is an inflection point.
For an inflection point
y changes from being positive to negative (A), or vice versa (B).
The curve changes from being concave up to concave down (A), or vice versa (B).
y (slope) has the same sign on both sides of the inflection point.
y (slope) will assume a local minimum or maximum value [eg, see the table in 2.(a)(i)].
This y value will be 0 for a stationary inflection point.

A
B
So, if we are indeed at an inflection point now - with knowledge of the immediate past movements and
of the mathematical behaviour of graphs which have inflection points - then Julies statement doesnt
make sense because the sign of the slope which pertained prior to the inflection point will continue.
That is, we do have some knowledge of where were going from here continuing down (A) or
continuing up (B). However, the slope (rate of climb/decline) would be unknown.
If Julia used business jargon (eg, Investopedia) and was describing the behaviour of y (q.v.)
[Students do not have to mention this dubious appropriation of mathematical terms.]

(The bold emphasis below is mine.)


eg, http://www.investopedia.com/terms/i/inflectionpoint.asp

An inflection point is an event that results in a significant change in the progress of a sector
and can be considered a turning point after which a dramatic change, with either positive or
negative results, is expected
According to this explanation, an inflection point is a turning point. So, if we are at a turning point now
- with knowledge of the immediate past movements and of the mathematical behaviour of graphs which
have turning points - then Julies statement doesnt make sense because the trend which pertained prior
to the turning point will reverse. That is, we do have some knowledge of where were going from here
changing the trend from up to down or vice versa.
If Julia used standard mathematical concepts and was describing the behaviour of y
At an inflection point on the graph of y, there is a turning point in the graph of y.
So, maybe Julie was referring to being, for example, at a point where
* the slope of y (rate of increase over time)
became steeper and then declined - although
retaining its sign (depicted here for another
example of an inflection point different
from A and B above).
* the slope of y (rate of decrease over time)
became larger and then declined - although
retaining its sign.

Marker judgement: up to 4 marks


BTW: another example of an inflection point:-

Statements like the stock market changed its concavity (meaning?) didnt earn marks.
At a point of inflection, the curvature doesnt change sign: y changes sign.

Show your working. (SYW)


Question 3

(a)

(i)

[(4+2) + (6+3) = 15 marks]

dy/dt = 100e0.05t
(dy/dt)dt

= 100e0.05t dt

dy

= 100e0.05t dt

/1

= 100e0.05t dt

/1

= 100(1/0.05)e0.05t

/1

+c

/0.5

= 2,000 e0.05t + c
(ii)

/0.5

y = 2,000 e0.05t + c
y = 200 when t = 0

200 = 2,000e0.050 + c

/0.5

200 = 2,000e0 + c

(b)

(i)

200 = 2,000 + c

/0.5

c = -1,800

/0.5

Answer: y = 2,000 e0.05t 1,800

/0.5

dy/dx = xy
Separate the variables.
dy(1/y) = x dx

/1

ln|y|

/1

= x2/2

/1
+c

/0.5

eln|y| = e 0.5x + c
/1
2

y = e 0.5x ec
/1

(ii)

y=

Ae 0.5x , where A = ec

y=

Ae 0.5x

/0.5

y = 1 when x = 1

1=

Ae 0.51
/1

A = e-0.5

= Ae0.5
/1

or

y = e 0.5x 0.5

or

y = e-0.5 e 0.5x
2

y = e 0.5( x 1)

or

y = (1/e) e 0.5 x

y = 0.6065 e 0.5x

or

/1

Show your working. (SYW)


Question 4
(a)

[(8+1) + (1+10+2+7) = 29 marks]

TR = 20xy 10x2 50y2 + 800y


Note: X and Y denote the goods; x and y, the number of units of goods X and Y.
[Units may be tonnes, litres, etc.]
(i)

To find an optimum:-

TRx = 20y 20x


TRy = 20x 100y + 800
Equate 1st derivatives to 0.
TRx = 20y 20x
0 = 20y 20x
TRy = 20x 100y + 800 0 = 20x 100y + 800
Answer: 10 units of X, 10 units of Y.

/1
/1
x=y
20x 100x + 800 = 0
80x = 800, x = 10 = y

/1
/1.5
/0.5

Now, use the 2nd derivatives to determine if the point where x = y = 10 is a local maximum, local
minimum, stationary point of inflection or a saddle point.
= TRxxTRyy (TRxy)2
TRxx = d/dx(TRx)
= -20
/0.5
TRyy = d/dy(TRy)
= -100
/0.5
TRxy = d/dx(TRy)
= 20
/0.5
2
= (-20)(-100) 20 = 1,600.
/0.5
TRxx < 0, TRyy < 0 and > 0.
/0.5
So, there is a maximum point when x = y = 10.
/0.5
(ii)

(b)

TR = 20xy 10x2 50y2 + 800y


When x = y = 10,
TR = 201010 10102 50102 + 80010
=$
4,000

TR = 20xy 10x2 50y2 + 800y


(i)
Sales constraint (on total revenue): 2x + 4y = 44.5
(ii)

Lg = 20xy 10x 50y + 800y + (44.5 2x 4y)

/0.5
/0.5
/1
/1

Lgx = 20y 20x 2


Lgy = 20x 100y + 800 4
Lg = 44.5 2x 4y

/1
/1
/1

Set the 1st derivatives = 0. [BTW, much easier to solve via matrices.]
0 = -20x + 20y - 2
(1)
0 = 20x 100y 4 + 800
(2)
0 = 2x 4y + 44.5
(3)
40x + 40y 4 = 0
60x 140y + 800 = 0

(4) = 2 (1)
(5) = (2) (4)

eliminated.

60x 140y + 800 = 0


-60x -120y + 1,335 = 0
-260y + 2,135 = 0

(5)
(6) = 30 (3)
(5) + (6)

x eliminated.

260y = 2,135
y = 8.211538 (Store in calculator memory.)

y calculated.

/2

(3) -2x - 4y + 44.5 = 0


x = (44.5 4y)
x = (44.5 4 8.211538) = 5.82692

x calculated.

/2

Answer:
5.8269 units of X;
8.2115 units of Y.
A matrix solution is OK if details are shown.
Answers must be correct to 4 decimal places.
(iii)

(iv)

/1

/1

0 = -20x + 20y - 2
(1)
2 = -20(x y)
= -10(x y)
x = 5.82692 and y = 8.211538
= 23.8462

/2

Interpret the value of the Lagrange multiplier in (b)(iii)


= 23.8462
If the constraint (here, $44.5) is increased(decreased) by $1 (1 unit),
then the maximum value of TR
increases(decreases)
by approximately $23.85.

/0.5
/0.5
/0.5
/0.5

Check the accuracy.


The equations in (ii) and (iii) can be represented by matrices: AX = C.
(An algebraic approach is also OK.)

Evaluate TR
Change the TR constraint by $1 from 44.5 to 45.5.

/1

New values for x and y


Evaluate TR

/2
/1

eg, a $1 increase in the constraint led to a


$23.08 increase in the maximum value of
TR.

The interpretation of is quite accurate.


/1
[In these examples, the discrepancy in estimating the maximum TR is only about 0.6%.]
Markers
Bonus of 5 marks to students who recognised that, although part (b) specifies an achievable mathematical task,
its economic interpretation is inconsistent. We are initially told that TR = 20xy 10x 2 50y2 + 800y. Later, we
are told that Good X sells for $2 per unit and Good Y sells for $4 per unit TR = 2x + 4y!
Furthermore, if TR = 20xy 10x2 50y2 + 800y is maximised at x = y = 10, then is revenue supposed to fall if
an additional item of Good X and an additional item of Good Y are sold?
[Mea culpa! Note to self: read the problems in TB4s Instructors Manual more carefully.]
Show your working. (SYW)
Question 5
[3 + (2+2+2.5+1.5+2) + 2 = 15 marks
(a)
A is a 33 lower triangular matrix. Show, in general, that det(A) = the product of the diagonal terms.

[ ]
[ ]

Let A =

a 0 0
b c 0
d e f

/0.5

det

=a

a 0 0
b c 0
d e f

| |
c 0
e f

-0

| |
b
d

0
f

+0

| |
b
d

c
e

/1
= acf e 0 0 + 0
= acf
= the product of the diagonal terms of A.
NB, showing this for a numerical example is NOT showing it in general: 0 marks.

/0.5
/0.5
/0.5

(b)

ALL OF THESE OPERATIONS MUST BE CARRIED OUT IN EXCEL.


Award 0 marks for any activities done with different software.
A has dimensions 86; B, 68.
Cells B1:G8 are named A, and cells B10:I15 are named B.
IMPORTANT: you MUST display your Excel formulas AND you MUST also display the row and
column headings (see the Excel Appendix below) so that your formulas can be interpreted. Marks
WILL be deducted if you neglect to do this.
(i)
AB and trace(AB)
AB: 86 68 88.

(ii)

(iii)

AB
L2:S9
=MMULT(A,B)

/1

trace(AB)
L11
=L2+M3+N4+O5+P6+Q7+R8+S9

/1

BA
L13:Q18
=MMULT(B,A)

/1

det(BA)
L20
=MDETERM(L13:Q18)

/1

BA and det(BA)
BA: 68 86 66.

AI6 and trace(AI6)


AI6: 86 66 86
I6 (the 66 identity matrix) is here named I_6.
/0.5
[Lecture 8, Slide 7; Lecture 9, Slide 34.]
AI6
L22:Q29
=MMULT(A,I_6)
/1
trace(AI6)
AI6 (which = A) isnt square. So, theres no trace. /1
(0 marks for stating trace = 0.)
(Its true that AI6 = A can be determined algebraically.
However, you were asked to use Excel.)

(iv)

A2 and det(A2)
Because A is not square (86), AA is not conformable. So, A2 doesnt exist.
Therefore, det(A2) cannot be calculated.

/1
/0.5

(v)

AAT and trace(AAT)


AAT: 86 68 88
AAT L31:S38
=MMULT(A,TRANSPOSE(A))

/1

trace(AAT)
L40
=L31+M32+N33+O34+P35+Q36+R37+S38
/1

(c)

WITHOUT USING ANY ELECTRONIC CALCULATION DEVICE


C is a square matrix: 1212.
So, C has a determinant.
det(C) = 0
because the elements in column 5 are twice the
corresponding elements of column 11.

Show your working. (SYW)


Question 6
Using matrix techniques,

[4 marks]

/2

Individual sales (number of units) for Alpha, Beta, Gamma and Others
April
SA (43 31 41)
970, 550, 185, 195, respectively.
=MMULT(S,A)

/1
/1

SM (43 31 41)
940, 500, 175, 185, respectively.
=MMULT(S,B)

May

/1
/1

Show your working. (SYW)


Question 7
(a)

[6 + (3+9+3) = 21 marks]

y = (x2 x + 5)/(2x + 3)
Obtain dy/dx
Let u = x2 x + 5 and let v = 2x + 3
dy/dx = (vdu/dx udv/dx)/v2
du/dx = 2x - 1
dv/dx = 2
dy/dx = [(2x + 3)(2x 1) - 2(x2 x + 5)]/(2x + 3)2
= [1/(2x + 3)2][4x2 + 4x - 3 (2x2 - 2x + 10)]
= [1/(2x + 3)2][4x2 + 4x - 3 2x2 + 2x - 10)]
= (2x2 + 6x 13)/(2x + 3)2

/3

[Or, use the Product Rule with v = 1/(2x + 3)]

dy/dx = 0
when 2x2 + 6x 13 = 0.
2x2 + 6x 13 = 0 when x = (-6 140)/4 = (-3 35)/2

(b)

Answer:

x = -4.4580399 or (-3 - 35)/2

or

x = 1.4580399 or (-3 + 35)/2

(i)

Graph y = (x2 x + 5)/(2x + 3) for -1.4 < x < 2.

/3

(ii)

Shape
x-axis label
y-axis label
domain includes -1.4 x 2

/1
/0.5
/0.5
/0.5

numbers shown on both axes

/0.5

Are there any turning points or points of inflection in the graph in (b)(i)?
For -1.4 < x < 2, dy/dx = 0 when x = 1.4580399

[See part (a).]

To check whether the graph has minimum, maximum or inflection points, obtain y.

Obtain d2y/dx2
y = (2x2 + 6x 13)/(2x + 3)2
Let u = 2x2 + 6x 13 and let v = (2x + 3)2
dy/dx = (vdu/dx udv/dx)/v2 (Quotient Rule)
du/dx = 4x + 6 = 2(2x + 3)
dv/dx = 2(2x + 3)2 = 4(2x + 3)
dy/dx = [(2x + 3)22(2x + 3) - (2x2 + 6x 13)4(2x + 3)] / (2x + 3)4
= [2(2x + 3)2 - 4(2x2 + 6x 13)] / (2x + 3)3
= [2(4x2 + 12x + 9) (8x2 + 24x - 52)] / (2x + 3)3
= [8x2 + 24x + 18 8x2 - 24x + 52] / (2x + 3)3
= 70/(2x + 3)3

/4

At x = 1.4580399,
y = (x2 x + 5)/(2x + 3)
= (1.45803992 - 1.4580399+ 5)/(21.4580399 + 3)
= 0.9580

/1

y = 0 (exactly)

[See part (a).]

y = 70/(2x + 3)3 = 70/(21.4580399 + 3)3 = 0.3381 > 0.

As y > 0, there is a local minimum.

/0.5
/1
/0.5

[This check is needed because, if y = 0 at x = 1.4580399, there would be an inflection point.]

Point of inflection for -1.4 < x < 2?


y = 70/(2x + 3)3
y 0 for -1.4 < x < 2
So, there is no point of inflection for -1.4 < x < 2.

(iii)

We found that y = 0 when x = 1.4580399


We then had to investigate further to
determine whether we had a minimum, a
maximum or a stationary point of inflection.

Without Calculus, we can use Excel to calculate


the values of y in the near neighbourhood of x =
1.4580399 Values of y are larger on both sides
of x = 1.4580399

So, y has a minimum value at x = 1.4580399

/2

Alternatively, we could graph the function


for larger values of x in order to get a less
limited view and see that y has a
minimum value at x = 1.4580399

/3

Show your working. (SYW)


Question 8
(a)

(i)

(ii)

(iii)

[(2+3+5) + 3 = 13 marks]

(1 x)x dx
= (x1/2 x3/2) dx
= x1/2 dx x3/2 dx
= (2/3) x3/2 (2/5)x5/2 + c
(x3 + 5x2 4)/x2 dx
= (x + 5 4x-2) dx
= (1/2)x2 + 5x + 4x-1 + c
3x(1 2x2) dx
Let u = 1 2x2
du/dx = -4x, dx = du/(-4x)

/0.5
/1.5
x0
/1
/2

/1
/1

3x(1 2x2) dx

(b)

= 3xu du/-4x

/0.5

= -(3/4)u du

/0.5

= -(3/4)(2/3)u3/2 + c

/1.5

= -0.5(1 2x2)3/2 + c

/0.5

f(x)g(x) dx = f(x) dx g(x) dx ?


This statement is not true in general as shown by a counter-example.
[Deduct 1 mark is the answer begins with f(x)g(x) dx = f(x) dx g(x) dx, ie, stating that it is true,
when it is not.]
eg, f(x) = x, g(x) = x2
LHS = x x2 dx
= x3 dx
= x4/4 + c
RHS = x dx x2 dx

= (x2/2 + c1) (x3/3 + c2) x4/4 + c


So, the statement is not true in general.

Spelling lesson
o 1 minimum, 2 minima. 1 maximum, 2 maxima.
o slope not slop.
o point of inflection not infection.
o trace spells trace; transpose spells transpose. (Many people confused these terms.)
o sloping not slopping.
o linear not liner.

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