2022 (MAY) | : Business Mathematics ePaper + eine Course : B.Com. (Hons.) : ra Maximum Marks: 75 II questions. Marks are indicated against each question. Simple calculator is allowed. 4A firm purchases two machines at a cost of %31,000 and %35,000 iedvely. Both machines have a useful life of 4 years and have zero salvage lsat the end of 4 years. Find the depreciation of each machine for each gusing matrix notation if: (Both machines are depreciated by the straight-line mhethod, () Both machines are depreciated by the sum of years digit method, j First is depreciated by straight-line method and second by the sum of years digit method. $i, () According to straight line method, machines are depreciated by equal amounts each year. Thus, the depreciation of each machine for each year when both are depreciated by straight line method is calculated as = [31,000 has tow BS aaaal * AB e 31,000|[1111 7,750 7,750 7,750 7,750 mountofDeprecation) = ont G a4 nl = [eo 8,750 8,750 8,750 shaw ‘Attempt 4 0 : 4444 4 Acording to the sum of the year’s digit method, the annual depreciation eS year for the first four years would be in the ratio of 4: 3: 2:1 or 233 1 2 10’ i0' Io and ne itis the depreciation of each machine for each year when both are lepreciated by the sum of the years digit method is calculated as ae Ce = AS 221 __ |35,000|’ ° ~ 10 10 10 10 * AB ___, _ [12,400 9,300 6,200 3,100 Oth (Amount of Deprecation) = (eee 10,500 7,000 3,500 : © depreciation of each machine for each year when first is depreciated bY the straight line method and second by the sum of years digit method ‘calculated as es Aol 9 _|t444 0 35,000) B= |4 aaa ‘ 7,750 7,750 7,750 7,750) ” AB (Amount of Deprecation) = i 000 10,500 7,000 a 0 . Or j ByCoMbol a crop disease it is necessary to use 12 units of Chemical A, Ra Of Chemical B and 15 units of Chemical C. One barrel of Spray Qerttins one unit of A, one unit of B and one unit of C. One barrel of spray nntltins 2 units of A 6 units of Band 5 units of C. One barrel of sprty R % 3 units of A, 2 units of B and 3 units of C. Find how many barrels of 0 t. (Solve by Matrix Algebra). 5 5 ‘ Pray be used to just meet the requirement 237SHIV DAS DELHI UNIVERSITY SERIES of R are needed to meet the x 2-21 x3-1%2)+3(1*5-1% 6) 263 - 2) +35 - 6) =8-2-3=3 4-18 =-14 2-3)=1 -2=4 2 x=1,y=1andz=3 Thus, 1 barrel of P, 1 barrel of Q and 3 barrels of R must be used to just meet the requirements. (b) An economy produces only two commodities X and Y. The two commodities serve as intermediate inputs in each other's production. To produce a unit of X, 0.3 units of X and 0.6 units of Y are needed. Similarly, to produce a unit of Y, 0.4 units of X and 0.2 units of Y are needed. 4 and 6 labour days are required to produce a unit of X and Y respectively. The wage rate is 7250 per labour day. If 240 units and 360 units of X and Y respectively are needed for final consumption, find the gross output levels of the two commodities. Also, calculate the equilibrium prices, total labour requirement and the total value-added. E Sei 03 04 Sol. The input-output matrix is A = S cal [x f240 LetX= (7 be the output matrix required to meet the final demand, D= [al Thus, X=AX+D = (I-A)X=D 2 X=(-ayiD Hi _ ay 2 {1 0]_[03 04]_[ 07 04 ete F | i 02] |-06 08 {1- A] = {(0.7)(0.8)] - [(-0.4) = (-0.6)] = 0.56 - 0.24 = 0.32BUSINESS MATHEMATICS—2999 (May) 239 ince [[- Al #0, s : j “(15 A)" exists. OSM eT aise BLE) a [x] 1 [08.04 20) y| 032[0.6 0.7 || 360 4_[192+144]__1 [336] rr059 = 9:33| 144 + 252] = 032] 396 = ] hus, the gross output of the two commodities are 1,050 units and 1237.5 nits respectively. — ge ecquilibritum prices, where wave rate (6 <50 her labour day. ri t Ay ee 1 [08 0.6][4 x 250 te {a-A)7] tw] ~ 033] 0.4 oe 1 ia 0 fe 1 [ 800+ 99% 2 oi an 0) 1 [1,700] [5312.5 032| 0.4 0.7 || 1,500 aay es 2 waa| 1320] a [ss125] Hence, the equilibrium prices per unit of two goods are %5,312.5 and %4,531.25 respectively. Total labour requirement = [x y] [i] 2, = [1,050 123733[4] = [4,200 + 7,425] = [11,625] Total value added = [x vfs] = [1,050 12875}| 59] {10,50,000 + 18,56,250] = [2,906,250] Or A two-industry input-output relationship is given below: it Industry I I Final Demand Gross Output I 80, 60. 60 200 ine 50. 100 150 300 Labour days 100 120 Using matrix notations, determine: (a) Gross output required to satisfy the new final demand of 90 and 120 units for industry I and'II respectively. Also, test the Hawkins-Simon Conditions for the viability of the system. (0) If labour available is 250 labour days, is the solution feasible? () Equilibrium prices if the wage rate is %60 per labour day. Sol. (a) The input-output matrix 1S 80. 60] p24 300 300 -|} a=| 30 i0/[4 200 300. ie ( be the output matrix required to meet two final demand, D= [al _ Then, -AX=D > (-AX=D =x =(I-A)1p240 SHIV DAS DELHI UNIVERSITY SERIES poate (P3} (Ba) ha 8a 2% oo Since |I- A| #0, (I= A} exists. For Simon-Hawkins conditions: (i) [1- Al = % of 0.35 > 0 and (ii) All the elements of the main diagonal of leontief matrix (I - A) i 2 and 2 are positive and less than 1. Hence, the conditions are satisfied and the system is viable. xeaeayt v= [5] 9{ ia] = [FPL] La] -. Gross output : x = 240 units and 270 units, *. The equilibrium prices of the two commodities are 74.28 and %58. respectively. Labour Requirement = [x alt] = [240 270139200] = [240 270){ | = [120 + 108] = [228] ‘As Labour Requirement < Labour Availability. Therefore the solution is feasible. Equilibrium prices when the wage rate is %60 for labour day. Pt =[a-ary Iw] _ 20] 2 1130]_ 20f 20+6 ] _ 20[ 26 ]_[7428 Pr iw] 7 | 2 32a} 7 Lotta] 7 [204 58.28 nd 258. (od +, The equilibrium prices of the two commodities are %74.28 a respectively. Q. 2. (a) Find the dual of the following Linear Programming Problem. Maximize: Z = 8x, - 6x, + 7X3 + 2X4 Subject to the constraints: 4x, + 3x2 + 6x3 + x45 40 oxy + 2x, + 3x3 + x4 55 9x, ~ 5xq + 7x3 - X42 60 6x, + 2x3 + 4x, = 47 Xz Xy Xy Xq20 Sol. Maximize: Z = 8x, - 6x2 + 7x3 + 2x4 = Subject to the constraints: 4x, + 3x, + 6x3 + 4 $40 oxy + 2p + 3x3 + %4S5 9x, - 5xy + 7x5 - X42 60 = 9x, + xy - 7x3 + xy S -60 6x, + 2x, + 4x, $47 . gay 24 ey => bx, - 2x3 - day $-47 6x, + 2x, + 4x, 247 Let the dual variables be yy, Yor Yar ¥4 and ys respectively. The dual problem isBUSINESS MATHEMATICS — 2999 (May) Minimize: Z* = 40y, + 5y, — Subject to: dy, - y, z ope ee Alia a bee +: - 6y, + By, - 7y + 2y, - 2ys = 7; a ry Ho &¥4 ~ bys > ~6 Yar Yor Vy Yq and y= > 0 3 Ma ys = 2 Let Y4-Y5 =y The dual problem can further be reduced to, Minimize: Z* = 40y, + 5y> - 60y5 + 47y Subject to: 4y, - y, - 95 = 8; 3 ‘ , ta * 2y2 + By, + by > 6 St + 3Y2—Tys+ 2y27, yp +h ty tay ed Yu Yor Y3, 2 0 and y is unrestricted in sign. Or Aretired person wants to invest up to an amount of 230,000 j i securities. His broker recommends investing in two bonds: Toad Apne 7% and Bond B yielding 10%, After some consideration, he decides to invest at most 12,000 in Bond B and at least %6,000 in Bond A. He also wants the amount invested in Bond A to be at least equal to the amount invested in Bond B. What should the broker recommend if the investor wants to maximise his return on investment? Solve graphically. 2 Sol. Let x and y be the amount invested Maximum Return, Z = 0.07x + 0.10y 241 in Bond A and Bond B respectively. Subject to: x+y<30,000; x>6,000 y < 12,000; x2y; xy20 Let x + y = 30,000 | Let x = 6,000 Let y = 12,000 Letx=y £3 0 30,000 x {| 0 | 12,000 y{30,000] 0 : y | 0 [12,000 Check Points: : x+y < 30,000 x 2 6,000 y < 12,000 x2y Putx=0, y=0 Put x =0, y=0|Putx=0 y=0 Putx=0 y=0 =< 30,000(True) | 0 2 6,000 (False)| 0 < 12,000 (True) |0 > y (True) The feasible region is ABCDE. Y i Points z= 0.07x + 0.10y (6,000, 0) 420 i500, 6,000) 1,020 | (12,000, 12,000) 2,040 18.000, 12,000) 2,460 (Max.) £20,000, 0) 2,100 wnt value of z is maximum at is Petefore, the optimal solution Ys 94,°2460 at x = 718,000 and242 SHIV DAS DELHI UNIVERSITY SERIES (b) Given below is the simplex tableau for a maximization type of linear programming problem: G, | Basic Variable _ 5 z i , s Quantity 40 Xy ; 1 0 4 7 0 12 35 a Ei 0 1 z 3 0 a 0 83 2 0 0 2 a 1 15 ‘Answer the following questions, giving reasons in brief: () Does the table above give optimal solution? (ii) Is this solution feasible? (iii) Is the solution degenerate? (io) Does the problem have alternative solutions? If so, show one such solution. (2) If 5; is the slack in Machine A (in hours/ week), s, is the slack in machine B (in hours/ week) and s, is the slack in machine C (in hours/week) which of these machine(s) is being used to the full capacity when producing according to this solution? (vi) What are the shadow prices of the machines? (vii) Ifa customer is prepared to pay a higher price for product x,, how much should the price be increased so that the company’s profit remains unchanged? (vii) How many units of the two products x, and x, are being produced according to this solution and what is the total profit? (x) What is the maximum you would be prepared to pay for another hour (per week) of capacity on machine A, B and C respectively? (2) If the company produces 6 units of x, how many units of x, and x, shall have to be reduced, if any? Sol. Simplex Table es 30 [ 40] 35] 0 | 0 0 4 ae : || |Basic Variable| Solution | 5 | x, | 53 40 % R 3 | 2 ].0 0 35 % a 2 0a 0 5 0 15 Zio} o i Z 2 is) ; 2 F | 40 | 35 0 G-Z; < Blo | o -10 |} 0 (@ Yes, it is an optimal solution because all entries in CG, - Zj row are negativ Or zero. : (i) Yes, (i it is feasible solution because optimal solution is always feasible. (iii) No, because x one of the basic variables has solution value equal to 0. (2) No, it does not have alternatives solution because none of the non-basi variable has 0 in C; - Z; row in the final simplex table.BUSINESS MATHEMATICS — 2022 (MAY) 243 pine 4 and B are being used to the full capacity because value of @ a variables $1 and s, is zero in the optimal simplex table. sla! sh adow ie aa @ Machine A= 3 Per hour; Machine B = 710 per hour; Machine C = Nil ae entry in the Cj ~ Z; row under x, is 2. This means the profit will be il) B : reduced by B if one unit of x, is added to the solution. Hence, in order to = sare zp reduction in profit the price of x, should be increased by B. B01, = 12,857 24and Total Profit = 71,215. (oitt) 1 a @) Machine A = 8 per hour; Machine B = %10 per hour; Machine C = Nil ¢) Reduction in x2 = dx6=2 units; Redaction inx,= 2 x 6=5 units luces three products, P,, Pz, and P; from two raw materials oduct P,, requires one unit of A, 3 units of Band 2 units of L. One unit of product P, requires 2 units each of A and B, and 3 units of L, while one unit of P;, needs 2 units of A, 6 units of B and 4 wits of L. The company has a daily availability of 8 units of A, 12 units of B wnd 12 units of L. It is further known that the unit contribution margin for the products is €3, 2 and %5 respectively for P,, P,, and P3. Formulate this problem asa linear programming problem, and then solve it to determine the optimum product mix. Does the problem have alternative solutions? If, so find one such alternative solution. 12 Sol. Let x,, x, and x3 be the output of products P,, P, and P, respectively. Maximum (Z) = 3x, + 2x2 + 5x3 Subject to: X + 2x9 + 2x, <8 3x, + 2x, + 6x3 S12 2x, + 3xy + 4x, 512 Xy, Xp, X3 20 Introducing slack variables s,, 82 and 53, %, + 2x) + 2x, + 5, =8 3x + 2x, + 6x5 + 5 = 12 2uy + Bxy + 4x, + 55 = 12 Xp Xp, Xy 51, 89, 53 20 Acompany prod rr Aand B, and labour L. One unit of p we may write the problem as: Simplex Table-I 3 2, 5 0 0 0 Solution |’ x, | x9 || x3 & a is | Race 8 1 2 2 1 0 0 4 12 3 (2a Ol oe oe 12 oz 3 I 4 0 0 A 3 0 o {| 0 |] 0 0 0 0 oF 3 5 5 | 0 0 0244 SHIV DAS DELHI UNIVERSITY SERIES Simplex Table-II ae Basic Variables | Solution 5 = 2 x : 2 Ratio 0 51 4 onl aoe S/o 5 3 Sues | 7 on wena em one aon Om aa 0 53 4 (ipo eee Zi 10. (ezzllis/a | 5 | of 76 [co G-Z; fav2i[ 173 [0 | 0 |-5/6| 0 Simplex Table-III oe Basic Variable | Solution : 2 = 5 5 5 0 is 4 Gas ow oe ee i750 3 % 4 Ae o/s ow 1/38 |e 0 0 53 ues CIS /au os eo a7 ae at Zi 12 3 Dies ato Oe 0 Ge 0 Ones ean rs || 0 Since all the entires, in the C; -Z; are either negative or zero. Therefore, the solution given by the above table is Optimal. ‘The optimal solution is Z = €12, x, = 4 units, x, = O unit and x, = 0 unit, The problem has alternative solution because x, a non-basic variable has C,-Z, =0 ithe alternative solution is given by the following table: Simplex Table-IV Gy? | Basie Variables | Solution - ie - 5 2 a 0 a a5 0 eae ee ee 3 % 12/5 Tete eee Ono po /5i|e2/5: ele Xy 12/5 0 1 0 0° | =2/5 | 3/5 mls zi hod 3 Dele O lee O A 0 Gaz; Teo to be :. The alternative optimal solution is Z = %12,° ‘ = 2 units, x) = 2 units and x, = 0 unit q + Q. 3. (a) The manager of a bookstore determines that when a certain new paperback novel is priced at p rupees per copy, the daily demand will be = 300 - p? copies. Calculate the elasticity of demand at a price where tot revenue is maximum. . ieee Sol. Given. x = 300 - p?;. R, Revenue = px = (300 - p?) p = 300 p - P* Differentiate the above, w.rt. p, 4p = 300- 3p? oe : => 300 - 3p? = 0 aa BUSINESS MATHEMATICS — 2022 (MAY) 245 pe 300 = 100 ~ p= 10 (Ignoring negative value) 2 5 . ah For Revenu ete dp2 -6p 2R a 3 (4), a7 6010) = -60 <0 ve) dp? . Ris maximum at p = 10 and x = 300 - (10)2 = 200 a =_ ax p Flasticity of Demand, nq = - 7. = -(- roe ae tp x SS) sos ann apt 210) REE 200 Nalarp=10= 300 —(10)2 300-100 = 1 «ng is 1 at the price where R is maximum. Or Afirm has to produce 14,400 units of an item per year. The production cost ofeach unit is %5 and the carrying cost is estimated to be 10% of the value of the average inventory. It costs %25 to make the machine run regardless of the number of units produced in a run. Find the economic lot size. If currently, the firm produces in the lots of 1,000 units, find how much can the firm save if it roduces according to the economic lot size. 6 Sol. Let x units be the economic lot size. =14400x5+ * x5 x 010+ MAO 72 000 eles ¢ 2200-000 . 2 x Differentiated the above w.r.t. x, we get de 05 _ 3,60,000 * 25 pe? ee 5 _ 3,60,000 di 0.5 _-3,60,000 0.5 _ 000 _ Here, 5= = emu egee Oo > Tgt aS = 05x? = 7,20,000 0000 :. x = J14,40,000 = 1,200 ge _ 2(3,60,000) _ 7,20,000 For cost to be minimum, 77 ~ Pel a #s) 7,20,000 eee = “Oe >0 (+ve) (a auie1.200 (1200)? f * cis minimum at x = 1,200 and hence the econ lot size is 1,200 units. $ 3,60,000 _ At x = 1,000, ¢ = 72,000 + 3 (1,000) + “(1,000) ~ fee 3,60,000 _ 98 (1,200) + (1,000) aoe At x = 1,200, c = 72,000 + Thus, saving i =72,¢ 600 = %10 ; , Savin t= 72,610 - 72, i : * The eee ee 210 if it produces pcan a prey cullen Hee xe tural gas ‘ic feet. mn e t= 10, the annual world Sees at the rate of 10% continuously, : _ consumption s gas 1s Peeatare “sume thi i e same i kes - : 2 ss, casy cubic fest will be ae ee i eS a How long will it take to use) 246 SHIV DAS DELHI UNIVERSITY SERIES world reserves are 2,200 trillion cubic feet in the beginning (assuming that no new discoveries are made)? Sol. The rate of consumption is given by: f(t) = 50¢910' () Total consumption of gas in first 10 years is - Ynen dt = SD fearorf? = spofe02000 — 60] = 500[et - 1] = 500[2.7183 - 1] = 859.15 (ii) Let x be the number of years required to consume all the available gas. The total consumption of gas in x years is given by: | 50 2,200 = oe dt => 2,200= nag 4.4 = e0l0x _ 0 => 44 = efldr—1 > 54 = elllx Taking log on both sides, we get log (6.4) = 0.10x log e _ safe log x" = n log x and log ¢ = 1 = 0.7324 = 0.10x (0.4343) => 0.7324 = 0.04343x 0.7324 _ 0.04343 16.86 years Or For a monopolist, the demand function is x = 2,200—p with MC = 200 + 2x2, Determine the consumer's surplus at the price which the monopolist will like to fix. 6 Sol. Given. MC = 200 + 2x? and x = /2,200— Pp Here, x? = 2,200 - p => p= 2,200 - x2 Total Revenue, R = px = (2,200 - x2)x = 2,200x = x3 Differentiate the above, MR = 2,200 - 3x2 Profit is maximum where MR = MC 2,200 - 3x2 = 200 + 2x2 => 2,000 = 5x2 = x= 200 © 409 + x= VIO =20= 2, Now, p = 2,200 ~ (20)? = 2,200 - 400 = 1,800 = py Second order condition, us) < ao) at x9 = 20 a(R) _ At oo ae aor Sond Atx=20, 2 (MR) = -6(20) = -120; Atx=20, 4 (Mc) = 4(20) = 80 +. Profit is maximum at xp = 20 and Po = 1,800 : 4 + Consumer Surplus = Jer = XoPo = Fee200-22) dx - 20 x 1,800 0 0 . on 20 ned ae [2.2008 = | ~ 36,000 = | 2,200(20) — ope ~ 36,000 10 : 24,000 "36,000 = Aeon Find the elasticity of substitution for the Production function: 2 Q=aKF + 5-8.BUSINESS MATHEMATICS — 2022 (MAY) 247 ow that the isoquants generated by this production function are iso negatively sloped. = We have, O28 = ak? + bL sole 5 2 fak-8 + bLB] 4/5 Baie Wee pike APT Cm me IL #2 = MPq= Flak-# + bie]? (-B) ak -1 i _py/B- ace Mp, _ plac? bee weet = beet _pyKy* Ro Mie Flak-8 + bLBy/" (-Byak-8 4 ake (KE) fey) 2 MEISe o= “G/t) a(MRTS) 4) 36)" 1 c= (§) ; (Kae) = ~laourts) = b w+n(S) a(X) L i L Ke? Mee +(%) which is negative. K Thus, isoquants are negatively sloped. Or A monopolist charges different prices in the two markets where his ‘demand functions are x, = 12 - a and x, = 19 - Pe . His total cost function is C= 150 + 120x, where x is the total output. Find the prices that the monopolist should charge to maximize his total profit. Also, show that higher price will be charged in the market having lower elasticity of demand. 6 Sol. Given. x, = 12 - Fi and x,=19 a P, = 180 ~15x, and P, = 380 - 20x As we know, total revenue, R = p - ¥ Ry = 180x, - 1522 and Ry = 380x2 - 2033 Given. C = 150 + 120(x; +); ° Profit, r= R, + R2-C n= 180x, - 15x2 + 380x2 - 20x4 - 150 -120 (1 + %9) on ce Bay = 180 - 30x, - 120=0 = 30x, = 60 Pa 390 405,-120-0 = 0m, 260 oe “yen ose and ee 40-C ‘Oxe -30= A, dx, 9 B, and a = AC ~ Be = (-30)(~40) - (0)? = 1.200 > 9 As AC - B2 both A and C are less than zero. Sot eae see = 2 and P, = 180 ~ 182) = 150 and x2 = 6.5 and P, = 380 - 20(6.5) = 250248 SHIV DAS DELHI UNIVERSITY SERIES ~ 2a B 2 (ayo Mid OD, Xi x 1S 1 = 2» BR __(-)250 "n= psx = -(Ga)es = 192 - Higher price is charged in the market having lower elasticity of demand, Q. 4. (a) The revenue and the cost rate of an ABC mining operations are, respectively, R(t) = 12 - 388 and C(t) = 4+ #8 Where t is measured in years and R and C are measured in millions of Tupees, Determine how long the operations should continue and what the total profit will be at end of the operations? : Sol. The number of years the operations should continue is given by R’() = c(h “12-383 =44 1/3 => 4f4=8 tS 8 The operation should be continued till 8 years. => 1/3=2 = 1/3 = EUs Now, Total Profits = jRo-cat a 8 8 = JQ2-383 4-1/9) dt = [(8—4817) at = [8t =348]) 0 = 0 = [8(8) - 3(8)4/3] - [8(0) - 3(0)*/3] = 64 - 48 = 16 millions. Or s The demand function for two commodities x, and x, in terms of their res- pective prices p, and p, are given by: x, = py076°?2*9 and x, = py-06e4p1"7, Find the four partial elasticities of demand and determine whether the commodities are competitive or complementary. Also, show that the direct Price elasticities of demand are independent of prices whereas cross-price elasticities of demand depend on the price of the other commodity. 6 P P nmodity, Sol. x, = p,97e052*3 Xp = py OScl4p, +7 ox; ox. ii = (0.7) py17e05P2 2 pe = (-0.6) pot e047, +7 ax, ax, aa = py7(0.5)e05P2* 3 ae px 6(0.4)e04P +7 ae = pr, Open py, dn Elasticity of demand, ny; = oz, py OTe alts : ae » 9%) po _ (0.6)py eA +7 py _ Elasticity of demand, nz = ens plein = -0.6 As both nj and 159 are -ve, thus the commodities are complementary. Oxy Po _ pr27(0.5).c0572*3 p, iss, ee ie Pro P2*8 2s O.5p, Ox, Pi _ py (0.4)e24"+7 p : Ma = Opy x =. py 06e0ap 7 * = 0.4p,1 BUSINESS MATHEMATICS —2022 (MAY) 7 and N22 = ae A a, elasticities of demand are independent of prices. (Hence Proved) 1 1 act e a Dies pp and nn = OAPs : : fc WD ogoss price elasticities depend on price of other commodity. : roved) Z cance I machinery costs 12,500. The total cost of operations from the war Hines to a time ft is given by the function 9# + 16t. If the machine a f years, the resale value is given by the function 8,000 - #2. Find old a um time for the replacement of the machine. c Depreciation = Cost - Scrap value a = 12,500 ~ %8,000 + 117 = 4500 + 11 ge tte = 450 a 249 ‘Average depreciation per year = Total cost of Operation = 91 + 16f . i o416F _ Average operation cost per year = — 16t — 94+ 16 ‘Average cost of depreciation and operation per year is cy = £500 +114 + 9F + 16 = 45% + 208 +16 c= AE + 20 Here, C’(f) = 0 > o= =500 + 20 = 0= te : => 20P = 4500 P= 295 a t= 25 =15 c= ee -For cost to be minimum, C”(15) = ae > 0 (+ve) _ Thus, C is minimum at f = 15 and hence the optimum time for replacement - 1815 years, Or ‘The elasticity of demand of a commodity with respect to price is calculated to be ___5P. is the price. Find the demand function, if it is a W@eapeny: whee Pee ie pris : own that the quantity demanded is 5 units at p = 3. 6 Sp Sol. Elasticity of Demand, na= +3)" -2) 5 Rede pA eS al dk = GraG=D 4 ape PFIO-D ean Tai Fk ee GraiGsy ete Using partial fraction: : A a Js, PFDe=D 7 FF O-F . 5.=A (p-2)+ Bet 3)250 SHIV DAS DELHI UNIVERSITY SERIES Comparing the coefficient of p and constant term respectively, O=A+B A=-B 4 5 Acad: «»[From (ii) | 5 = 5B B= sil -«(ii) -1 1 1 ry [as+sale +1ix=0 -1 1 dx _ => Jaaap+ Jaa+ J® =0 => -logip + 3) + log(p - 2) + log(zx) = log(k) x(p-2)\ _ x(p=2) log ae } = log) = aay oe (1) oe 53-2) 5 Putting x=5 and p= 3, we get, Ga) =k ke? The demand function is oS a aE a 3 Q.5. (a) A debt of 28,000 due 2 years from now and 10,000 due 5 years from now is to be repaid by payment of 22,000 in 3 years, a payment of 35,000 in 6 years, and a final payment at the end of 4 years. If the interest rate is 7% p.a. compounded semi-annually, how much is the final payment? Sol. Let the final payment be %x. Let the focal date be 4 years hence, Thus, Value of old obligations = Value of new obligation : 8,000(1.035)2*2 + 10,000(1.035)-1*2 = 2,000(1.035)!*2 + 5,000(1.035)-2*2 + x => 8,000(1.1475) + 10,000(0.9335) = 2,000(1.0712) + 5,000(0.8714) + x => 9,180 + 9,335 = 2,142.4 + 4,357 + x => 18515 =64994+x “ ¥ = %12,015.6 Or A certain bank offers interest at the rate of 6% p.a. compounded quarterly. A competing bank compounds its interest continuously. What rate should the competing bank offer so that the effective rates of the two banks are equal? 5 Sol. Let r be the interest rate offered by the competing bank. 0.06 \* (14288) -1=e-1. => (1015)!-1=e-1 => &=1,0613 Taking log on both sides log e* = log(1.0613) = rloge = log(1.0613) => 1(0.4343) = 0.0257 CO257 = 005917 = 5.91% : (b) Suppose a machine costing %90,000 is to be replaced at the end of 8 years, at which time it will have a salvage value of 712,000. In order to provide money as log x" = m log x r=BUSINESS MATHEMATICS — 2022 (MAY) 24 i i i ice of the present hine costing 20% higher than the price o: he pi je FO) nek up. Find what amount should be set aside at the a i ee quarter, out of profits, for the sinking fund, if the fund eit ot Ee the rate of 8% p.a, compounded quarterly. nter gst Cost of New Salvage value of } ae ~ | existing Machine (790,000 x 120%) -(%12,000) = %1,08,000 - %12,000 = %96,000 Robe the amount that is set aside at the beginning of each quarter. it : 96,000 R | Sani ~ 1 : 96,000 ___ _ 96,000 -[ n= ® in the sinking fund equired in t Amount re sol i i x 4) quarters = 32 i= ae 2% or 0.02 1+ ij" -1) _[(1+0.02)8 1] _ [1.9222 -1 ‘As we know, Sy]; = [ory] = (oe 3 cael _ 0.9222 . 0. R= (eg —1) Ssao2 2 oom 46.11 96,000 _ 96,000- _ Re @di-1~ 45a1 ~ 2128.13 Or Find the purchase price of 75,000 bond, redeemable at the end of 10 years at 10% premium and paying annual interest at 4%, if the yield rate is to be 6% Pa. effective. 5) Sol. Annual Interest of Bond = 5,000 x 0.04 = ¥200 “Purchase Price = 200 43; + 5,500(1 + i)-" = 200 aigoo, + 5,500(1 + 0.06)-10 o 10 = 200 (tae | + 5,500(1.06)-10 10 = 200 $32 | + 5,500(1.06)-10, = 200 [1= 25584] + 5,500(0.5584) a = 200 (S418) + 3071.2 = 1,472 + 3,071.2 = 24,5432 greats, the purchase price of the Bond is 4,543.2 bea asset depreciates at the end of 10% p.a. for the first two years and ia 3% P.a. for the next three years, depreciation being calculated on the preg Value. If the cost of the as a set is 45,000, find the average rate of o tion and the depreciated value of the asset at the end of the fifth aac t ~ Pepreciation value at the end of 5t year = 45,000(1 - 0.10)? (1 - o.gave = 45,000(0.81)(0.778688) i = 328,383.18 = a the average rate of depreciation, then 5,000(1 ~ 1)5 = 28,383.18, : (1 ~ 95"= 0.63073252 SHIV DAS DELHI UNIVERSITY SERIES ’ Taking log as both sides log(1 - 1) = log 0.63073 Slog (1 - r) = log(0.63073) wl: 10g = nog, = Slog (1 - 7) = -0.2002 => log (1-7) = -0.04004 = (1-1) =Antilog(-0.0400) => (1 ~1)= Antilog( 7.95996) => 1-r=09118 <. = 0.0882 or r = 8.82% Or Mr. X borrowed %15,00,000 from bank and decided to Tepay it by equal quarterly instalments over a period of 5 years. The bank charges interest at 6% p.a. compounded quarterly. Calculate the amount of quarterly instalment, Also, find the interest and the principal paid in 15 instalment. 3 Sol. Let R be the amount of quarterly instalment. 0.06 ~~Here [n = 20 instalments and i= 9% = 95 _ ___15,00,000 1-(1+0.015) 0.015 0.015 Interest contained in the 15" instalment. = [Rez-sszoms|i = [87/368.80(a550:5)]0.015 1-(1+0.015)* = w76880| “Fag | «0.015 = 87,368.80[1 - 0.9145] = 87,368.80 x 0.0855 = %7470.0324 Principal contained in 15‘ instalment. = Quarterly Instalment — Interest in 15t Instalment. = %87,368.80 - %7470.0324 = $79898.77 gooa