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Statistics Exercises 1

1. The document contains exercises related to mathematics for economics, including implicit differentiation and functions such as Cobb-Douglas. 2. One exercise asks to define conditions for a consumption function in economic terms, including using the notion of marginal propensity to consume. 3. Another exercise asks to use implicit differentiation to derive an expression for marginal demand based on a profit, revenue, cost, and demand function model.

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Muhammad Amir Shafiq
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24 views3 pages

Statistics Exercises 1

1. The document contains exercises related to mathematics for economics, including implicit differentiation and functions such as Cobb-Douglas. 2. One exercise asks to define conditions for a consumption function in economic terms, including using the notion of marginal propensity to consume. 3. Another exercise asks to use implicit differentiation to derive an expression for marginal demand based on a profit, revenue, cost, and demand function model.

Uploaded by

Muhammad Amir Shafiq
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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Mathematik und ihre Didaktik

Institut fur
Dr. G. Goguadze

WiSe 2013/14

1. Exercise Sheet to Mathematics for Economics


9. Dezember 2013

Exercise 1. (3.1) A relation between the income of the population Y and the consumption C is
given via a function C = f (Y ) which has the following properties:
f (0)
0 f (Y )
0 f 0 (Y )
f 00 (Y )

<

0
Y
1
0

f needs to be defined only for Y 0 . Find a formulation of the four conditions using economics
terms. Use, for instance, a notion of a marginal propensity to consume for f 0 (Y ) .

Exercise 2. (3.2) In a simple Model the profit of a manufacturer depends on the produced quantity
Q given by
5
(Q) = 100Q Q2 .
2
On the other hand the profit can be obtained as revenue minus costs,
(Q) = P Q C(Q),
with not further known cost-function C(Q) and the price P . The sales volume depends on the price
via another unknown demand function Q = Q(P ) .
1. Determine using implicit differentiation an expression for the marginal demand Q0 (P ) .
2. For a price P = 62 the demand is Q = Q(62) = 20 . Die marginal costs C 0 (20) amount to
22 . How big is the marginal demand Q0 (62) ?
3. How big is approximately the change C of the costs for the sold quantity C(Q) , if the
price is reduced from 62 to 61 ?
4. How big is the marginal profit 0 (P ) =

d
dP

in case of the chaining price P ?

5. Calculate the profit and the costs for the prices equal to 62 or to 61 respectively.

Exercise 3. (3.3) A function y = y(x) is implicitly defined by an equation


x + ln y = y.
Calculate using implicit differentiation an expression for the derivative y 0 as a term of x and y . It is
known that y(2) = 0.1586 (rounded up to 4 figures after the decimal point). Check the correctness
of this value. Compute the value of y 0 (2) .

Exercise 4. (Inverse functions and implicit differentiation)


The function y = y(x) = x3 + 3x has an inverse function x = x(y) .
1. Determine using implicit differentiation the derivative x0 (y) .
2. As one can calculate is y(1) = 4 . Having this information, at which point can the value of x0
be calculated and which value does one obtain?
3. Why is it not as easy to determine x0 (2) ?

Exercise 4. (Cobb-Douglas-function)
A manufacturer of a product uses the production factors labour an capital. If the used labour is
denoted by L and the used capital is denoted by K , then the produced quantity Q can be given by
a formula
Q(L, K) = 5L2/3 K 1/3
1. Determine L0 (K) at the point K = 27 .
2. Complete the following sentence: If instead of K = 27 only K = 26 can be used, then in
order to produce the same quantity of Q = 60 the labour use has to be changed by ...

Exercise 5. (after exercise 7.1.8 b from Sydsaeter/Hammond)


Suppose y is defined implicitly as a function of x by the following equation
g(x + y) = x2 + y 2
where g is a given differentiable function of one variable. It is given that g(2) = 2 and therefore
the equation is satisfied by the values x = 1, y = 1 .
1. Find an expression for y 0
2. Which condition has to be fulfilled so that y 0 is defined?

3. What is the value of y 0 (1)

Exercise 6. (Supply and demand, second implicit derivative)


In the supply and demand model suppose that a tax of t per unit is imposed on consumers. Then
the model can be in general represented as follows:
Demand:
Supply:

D = f (P + t)
S = g(P )

Here D is the demanded quantity, S is the offered supply, each dependent of the price P and the
tax t via not further known but differentiable functions f and g .
The equilibrium price P for which D = S is a function of t : P = P (t) . Via implicit differentiation one can compute the following expression for P 00 (t) :
P 00 =

f 00 (g 0 )2 g 00 (f 0 )2
.
(g 0 f 0 )3

It is plausible to assume that the demand is decreasing with an increasing price, and the supply on
the other hand grows. If the demand is a convex function, the supply though a concave function of
the price, what can we conclude from this for the function P (t) ?
N.B. If you try to calculate P 00 using TI-nspire and the function ImpDif, you will see that it does
not work. The TI can namely not apply the chain rule to the f (P (t) + t) , it just differentiates w.r.t.
t and P which does not bring us to the goal.

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