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1 USEFUL INFORMATION FOR WRITING YOUR COMING EXAM

Below are valuable information for improving and preparation for Exams:

 Please always attempt to all questions

 Never memorise the answer to the questions but rather learn the formulas and method of
applications because questions might appears to be the same but the variables might have
been changed.
 Be on a look out and vigilant about the sign changes as you move the variable to the other
side of the equal sign.
 Always read the instruction and question careful to understand and attempt as required.
 Always explain your steps and give indication of the rules and condition under which you
are solving a problem
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1.2 ASSIGNMENT QUESTIONS

Instructions

 All questions are compulsory.

 In deciding how much detail to provide and how much time to spend on each question, it
is imperative that you use the mark allocation as a guide.
 Show all your works and interpret your results.
 Use graphs wherever appropriate. Graphs must be clearly illustrated.

ASSIGNMENTS
Semester 1: 2017 Academic Session
Course Code: AME311S
Course Name: Applied Mathematical Economics

Assignment 1

Instructions

 Answer all questions

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ASSIGNMENT 1

General Remarks

A reasonable few number of students struggled with question 2 hence scored average marks. The
average performance of most students is high in this Part of the Assignment. The correct answers
are provided to assist the students when they revise for the upcoming examinations.

1. Find the reduced form of equilibrium income (Y e).

Y = Β + I = α + 𝝳(Y – T) + I0 + G0
= α + 𝝳 (Y – T) + I0 = α + 𝝳 Y – 𝝳T + I0 + G0
= α + 𝝳 Y – (γ + βY) + I0 + G0
= α + 𝝳 Y – 𝝳γ –𝝳βY + I0 + G0
Y – 𝝳Y + 𝝳βY = α – 𝝳γ + I0 + G0
(1 – 𝝳 + 𝝳β)Y = α – 𝝳γ + I0 + G0

[5 marks]
2. Use comparative static to find the government spending multiplier, non-income tax multiplier and income
tax multiplier.

[15 marks]
3. If α = 85; δ = 0.75; γ = 20; β = 0.2; I0 = 45; G0 = 50find the effects of lump sum tax increase by $1
billion?

[5 marks]

Question 2

Consider the following microeconomic model.

Where is income and is the tax on the commodity.

Analyse the comparative statics of the model to find the effect of change in Income and Tax on the
equilibrium Q and P?

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Using the simultaneous equation approach, we put the functions into the implicit form which is in the
equilibrium and apply total differential, then do comparative static analysis.

Taking the exogenous to the RHS, we get,

Then, to find the effect of the exogenous variables to the endogenous variable first set

and divide through both sides of equations by to find the effect of .

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In matrix form

Then,

Using Cramer’s rule

Again we set and divide through both sides of equations by to find the effect of .

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In matrix form

Using Cramer’s rule

25 marks

Question 3

1. Solve the following system of equation using Cramer’s rule

a) .

Put the system of equation in matrix form

Using Cramer’s rule, , since also equals , the equations are

functionally independent. Then form the special matrix to get,

Thus,

b)

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 Put the system of equation in matrix form

Using Cramer’s rule, , since also equals , the equations

are functionally independent. Then form the special matrix to get,

Thus,

10 marks
2. Optimise the following function , using a) Cramer’s rule for the first order condition and b)the
Hessian for the second-order condition:

a) The first-order conditions are

which in matrix form is

Using Cramer’s rule, , since also equals , the equations are

functionally independent.

Thus,

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 b) Testing the second-order condition by taking the second-order partials to form the Hessian,

Thus,

Where,

and . With negative definite, y is maximized at the critical values

15 marks

Question 4
1. Determine the new level of total demand X if final demand increases by 10 in firm 1 5 in firm 2 and
6 in firm 3.

Firms Output
1 2 3

10 marks

2. In a three–industry economy, it is known that industry I uses 20 cents of its own product, 10 cents
of commodity III and 60 cents of commodity II to produce a dollar’s worth of commodity I industry II
uses 10 cents of its own product , 30 cents of commodity III and 50 cents of commodity I to
produce a dollar’s worth of commodity II while industry III uses none of its own product and
commodity I, but uses 20 cents of commodity II in producing a dollar’s worth of commodity III; and
the open sector demands N$ 1,000 billion of commodity I, N$ 2,000 billion of commodity II and 500
billion of commodity III

a) Write out the input matrix, and the specific input matrix equation for this economy.

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 5 marks

b) Find the solution output levels by Cramer’s rule.

From the above matrix, let so that our matrix represent , then we can
establish the determinant and form the special matrix to allow us to use Cramer’s rule

Then our

10 marks

Total [100 marks]

-END-

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1.3 PERFORMANCE STATISTICS FOR ASSIGNMENT 1/2012

Total number of students who submitted Assignment 1 = 13

Total score = 989
Average score = 76%
Students who scored above 50% = 12 (92.%)
Borderline cases, that is, 50% = 0 (0%)
Students who scored below 50% = 1 (8%)
Highest score = 98 %
Lowest score = 35%

1.4 EXAMINATION:JUNE 2015

The First Opportunity Examination for June 2017 (as well as the Supplementary
Examination taking place in July 2017) will cover all topics except of this course as
suggested by the course outline and the current study guide.
These are:

 Review of Mathematics for comparative static analysis;

 Cramer’s rule,
 Special types of matrices:
 Jacobean Hessian and Bordered Hessian;
 Sign definiteness of quadratic forms.
 Input- Output analysis (static models).
 Linear programming,
 Non linear programming
 Introduction to dynamic analysis
 First order differential and difference equation
 Review of Mathematics for comparative static analysis;
 Cramer’s rule,
 Special types of matrices:
 Jacobean Hessian and Bordered Hessian;
 Sign definiteness of quadratic forms.
 Input- Output analysis (static models).
 Linear programming,

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Furthermore, you are strongly advised to study the assignment questions and all the test
questions for an insight into the standard of questions that may be set around the above-identified
issues. This questions papers and their memo are available on request to my email address
[email protected] I will reply to make sure I forward you the soft copies
electronically.

Also, do consider the formation of Study Groups in order to share and cross-fertilise ideas on
issues related to the course. Furthermore, you should keep in close contact with the full-time
and part-time students since they are benefiting a great deal from the daily face-to-face contacts
with their Lecturer. Do not forget to read your Study Guide for the course. Finally, do not hesitate
to contact Mr. Eden Tate Shipanga (The Lecturer for this course) should the need arise.

1.5 ACTIVITIES IN THE STUDY GUIDE

The activities in the study guide are meant to provide additional intellectual challenge to you.
Do attempt to go through the activities in the study guide as they will really provide you with
practice questions needed for the mastery of the content for this course.

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