ECN1024/ECN1044 April 2025 Semester
Tutorial Set (6) – Lecture Note Set (6)
1) The supply and demand functions of a good are given by:
𝑷 = 𝟐𝑸𝟐𝑺 + 𝟑𝑸𝑺 + 𝟏𝟎
𝑷 = −𝑸𝟐𝑫 − 𝟑𝑸𝑫 + 𝟏𝟓𝟒
where P, QS and QD denote price, quantity supplied and quantity demanded,
respectively.
a) Determine the equilibrium price and quantity.
b) If the government imposes a tax of $5 per item, determine the new values of
equilibrium price and quantity. Round your answers to two decimal places. Who
pays the tax?
2) The demand function of a good is 𝑷 = 𝟏𝟎 − 𝑸 and the total cost function is 𝑻𝑪 = 𝟏𝟐 +
𝟐𝑸.
a) Find an expression for the total revenue function and deduce that the profit
function.
b) By solving the quadratic inequality 𝜋 ≥ 3, determine the range of prices which will
ensure that the firm’s profit is at least 3 units.
3) A firm’s fixed costs are 14 and the variable costs are 2 per unit. The corresponding
profit function is of the form 𝝅 = 𝒂𝑸𝟐 + 𝒃𝑸 + 𝒄 where 𝑄 denotes quantity.
a) Write down expressions for the total cost and average cost functions and sketch
their graphs.
b) Explain why 𝑐 = −14.
c) The firm makes a loss of 6 when 𝑄 = 1 and a profit of 4 when 𝑄 = 6. Write down
a pair of simultaneous equations and solve them to find 𝑎 and 𝑏.
d) Find the break-even points and hence find the maximum profit.
e) Find an expression for total revenue and deduce the demand function.
4) The price of goods over a three-year period is shown in the following table:
Beginning of Year 0 1 2
Price (in $) 1000 1,100 1,210
Explain why this data can be modelled exactly using an exponential function,
𝒑 = 𝑨𝒃𝒕
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ECN1024/ECN1044 April 2025 Semester
where 𝑝 denotes the price at the beginning of year 𝑡 . State the values of the
parameters, 𝐴 and 𝑏.
Assuming that the model continues to be valid in subsequent years, work out the
a) price of the good (to the nearest $) at the beginning of year 10.
b) number of complete years for the price of the good to exceed $8000.
5) The total number of sales, 𝑆, made 𝑡 weeks after the launch of a new model of phone
is given by
𝑺 = 𝟐 𝟎𝟎𝟎 𝟎𝟎𝟎(𝟏 − 𝒆−𝟎.𝟐𝒕 )
a) Estimate the number of sales after two weeks.
b) How many weeks does it take for sales to exceed one million? Give your answer
correct to one decimal place.
c) Sketch a graph of 𝑆 against 𝑡 to show how sales vary over time.
6) The number of items, 𝑁, produced each day by an assembly-line worker, 𝑡 days after
an initial training period, is modelled by
𝑵 = 𝟏𝟎𝟎 − 𝟏𝟎𝟎𝒆−𝟎.𝟒𝒕
a) Calculate the number of items produced daily
i. 1 day after the training period;
ii. 2 days after the training period;
iii. 10 days after the training period.
b) What is the worker’s daily production in the long run?
c) Sketch a graph of 𝑁 against 𝑡 and explain why the general shape might have been
expected.
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