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ETF2700/ETF5970 Mathematics for Business

Semester 2 2016
Assignment 1 SOLUTIONS
Total marks: 20 + 8 + 19 + 10 + 18 + 16 + 15 = 106 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 fail to answer 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.

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.
QUESTION 1
(a)

(i)

[(3+4+5) + (1.5+1.5+1.5+1.5+2) = 20 marks]


If the ENIAC cost US$6,000,000 and your smart phone cost
2 times more,
the phone would cost US$6m + 2$6m
1 time more,
the phone would cost US$6m + 1$6m
50% more,
the phone would cost US$6m + 0.5$6m
times less,
the phone would cost US$6m - 0.5$6m
75% less,
the phone would cost US$6m - 0.75$6m
99% less,
the phone would cost US$6m - 0.75$6m
1 times less,
the phone would cost US$6m - 1$6m

= US$18m
= US$12m
= US$9m
= US$3m
= US$1.5m
= US$0.06m
= US$0

/2

17 times less? The question is nonsensical because 1 times less is the lowest that the cost could
be.
/1

The author probably meant to say (but didnt say) that your smart phone cost one seventeenthousandth of the cost of an ENIAC.
$352.94
/0
(ii)

Of course, we dont know what the author meant, but we can consider the options.
If the author used the word exponential colloquially, he was probably trying to suggest that
there was a rapid/large increase over time.
/1
[NB, exponential growth is NOT synonymous with rapid/large growth. eg, a bank account
earning 0.0001% pa grows exponentially.]
If the author had been a student of ETF2700/5970, he would have consulted his lecture notes
(and/or TB4, p180) to recall that exponential growth refers to a specific pattern of positive
change of a numerical quantity. It may be of 2 types: unlimited growth or limited growth.
The authors tone (eg, pace of technological change seems to accelerate ... Read on
and prepare to amazed ) clearly shows that hes not referring to limited growth. /1

The general model for unlimited growth is y = abrx where, if x increases by 1, the new y value is the
previous y value multiplied by br. That is, each successive value is a constant factor the previous
value, ie, growth is proportional to the previous value.
However, the author does not make it clear which numerical quantity (the development)
has experienced exponential growth.
/2
(He may have been alluding to Moores Law: https://en.wikipedia.org/wiki/Moore's_law)
Growth is not proportional to time.
For an example of exponential growth, see the table in Question 5(d)(i) below. Note that
- the amount of growth per time period increases: the Increase column.
- the multiplier (1.03), from one period to the next, stays the same: the Ratio column.
Award 0 marks to any discussion of 19th & 20th century development not asked for.
(iii)

Adjustment has already been made for inflation.


The terms mega, giga and tera can take different meanings in different contexts.
In popular parlance, mega, giga & tera represent multiples of 1,000 bytes.
In Information Technology (IT), mega, giga & tera represent multiples of 1,024 bytes.
Because the author didnt state whether his calculations were exact or approximate, both
meanings are discussed here.
eg, 1,0242 = 1,048,576
eg, 1,048,5761,024
= 1,073,741,824
If the author used the terms in the popular sense, the calculations are accurate.
/0.5
$/5
5 MB
MB
$/byte
$/GB
$/TB
1 kB = 1,000
5,000,00
$0.0007000
$700,0 $700,000,0
bytes
0 $3,500
00
00
00
Calculations shown
/2
If the author used the terms in the IT sense, calculations are only approximately correct. /0.5
$/5
5 MB
MB
$/byte
$/GB
$/TB
1 kB = 1,024
5,242,88 $3,500 $0.0006675
$716,8 $734,003,2

bytes

72
00
Calculations shown

- Price/GB should be 100(716,800-700,000)/700,000


- Price/MB should be 100(734,003,200-700,000,000)/700,000,000
Bonus 1 mark if these calculations are shown.

00

/2

= 2.40% higher.
= 4.86% higher.

(b)

Bolt by the numbers


horizontal axis: presents the distance (metres) completed in the race - in contiguous 10 metre
groupings. [Curiously, the graphs columns do not abut.]
vertical axis: presents the times taken to run each of the 10 metre segments.
Time series
For studying the behaviour of a numerical variable over time.
vertical axis: the numerical variable whose behaviour is being studied.
horizontal axis: chronologically-ordered time periods at which the numerical variable is measured.
Deterministic relationship (p55, TB4)
Of the form y = f(x), where a value on the
horizontal axis (x) exactly determines the
vertical axis value y.
[eg, F vs C]
Scatterplot
For studying the relationship between 2 numerical variables [eg, yearly number of drownings and ice
cream sales($)], we plot a set of data pairs.
vertical axis: one of the numerical variables (often, but not necessarily, the dependent variable).
horizontal axis: the other numerical variable (often, but not necessarily, the independent variable).
Frequency distribution
May be represented by a histogram, a bar(column) chart, a frequency polygon.
horizontal axis: the numerical variable whose frequency of occurrence is being studied.
vertical axis: the frequency of occurrence of a value (or a group/bin/class interval of values) on the
horizontal.
(i)

Time series: no.


/0.5
The horizontal axis does not present a time variable, consisting of a chronological sequence of
time periods; instead, the axis displays the distance (metres) travelled.
/1

(ii)

Deterministic relationship: no.


Bolts performance does not occur according to a precise mathematical formula.
(It depends on many variables: physiological, psychological, meteorological, etc.)

/0.5
/1

(iii)

Scatterplot
/0.5
We do not have the value of a vertical axis variable plotted against the corresponding value of
the horizontal axis variable.
/1

(iv)

Frequency distribution: no.


/0.5
The vertical axis does not display the frequencies (counts, ie, whole numbers) of occurrence of
values or groups/bins/class intervals on the horizontal axis; instead it shows a time measurement
in seconds.
/1
This rules out the graph being a histogram.

(v)

None of the above.


Its a bar(column) chart.
horizontal axis: presents the distance (metres) completed in the race - in contiguous 10
metre groupings.
vertical axis: presents the times taken to run each of the 10 metre segments.
/2

QUESTION 2
(a)
Assume that Microwave A delivers x watts in 2.5 minutes.
Microwave B has 1,000/600 = 10/6 times the power of A.
So, Microwave B delivers (10/6)x watts in 2.5 minutes.
However, only (6/10) (10/6)x = x watts are required for the task.
So, only (6/10) 2.5 = 1.5 minutes cooking time is required for B.
(b)

(c)

[1.5 + 2 + (2+2.5) = 8 marks]

/1.5

(i)

Yes.

/0.5

(ii)

100(5,000,000 300,000)/300,000
= 1,566.7%

/1
/0.5

% change = 100(ynew - yold)/yold


(See Lecture 1 Slide 22)
(i)
Comparing FR with WW
(See Lecture 1 Slide 23.)
the difference in ABV is 12.85% - 9.5% = 3.35%
/0
the percentage difference in ABV is 100(12.85% - 9.5%)/9.5%
/1
= 35.26%
/0.5
ie, FR has 35.26% more alcohol by volume than WW.
/0.5
ie, it must be clear that FR > WW.
100(9.5 12.85)/12.85 = 26.07. WW has 26.07% less alcohol by volume than FR.
The formula Percent difference = ( | (V1 - V2) | / ((V1 + V2)/2) ) * 100 appears on the internet.
(Its a shame that mathematicians know nothing about it!)
So does the following:
http://www.forbes.com/sites/erikaandersen/2012/03/23/true-fact-the-lack-of-pirates-is-causing-global-warming/#26bce66ca231

(ii)

Which bottle contains more alcohol? By what percentage (to 2 decimal places)?
Wrights White is sold in a 750 ml bottle and has an ABV of 9.5%.
Freds Red is sold in a 1 litre bottle and has an ABV of 12.85%.
A WW bottle contains 9.5% of 750 ml
= 71.25 ml of alcohol.
A FR bottle
contains 12.85% of 1,000 ml
= 128.5 ml of alcohol.
100(128.5 71.25)/71.25 = 80.35%.
FR bottle has 80.35% more alcohol than WW bottle.
ie, it must be clear that FR > WW.

/0.5
/0.5
/1
/0.5

100(71.25 128.5)/128.5 = 26.07.


QUESTION 3
(a)
3,486.72 metres (x); 3.48672 kilometres (y)
(i)
x
2 decimal places.
y
5 decimal places.

(b)

WW bottle has 44.55% less alcohol than FR bottle.


[(1+1.5+1.5) + (1+12+1+1) = 19 marks]
/0.5
/0.5

(ii)

x = 3,486.72 m = 3.48672 103 m


6 significant figures.
0
y = 3.48672 km = 3.48672 10 km
6 significant figures.
x and y have the same number of significant figures.

/0.5
/0.5
/0.5

(iii)

x and y are of equal accuracy,


because they have the same number of significant figures.
3.48672 103 m = 3.48672 100 km: the same measurement, but in different units.

/0.5
/1

(i)

QSG, p31 (Getting Started)

/0.5

(ii)

Information not accurate.


Neglects to mention that 5 should be entered after pressing the DISP key. /0.5

The information is accurate


in later versions of QSG, which have this error corrected.

/0.5

UG p41-3 Getting Started


NB, this is only asking for information about the number of decimal places displayed on the
calculator. The Examples in the UG do not provide any additional information.

p41: turn on the HP 10bII+ for the first time: 2 decimal places
(BTW, turning on for the first time may be simulated by resetting the calculator.)
Accurate information.

/0.5
/0.5

p41: If the result of a calculation is a number containing more significant digits than can be
displayed in the current display format, the number is rounded to fit the current display
setting.
/0.5
Inaccurate information.
/0.5
eg, with a display setting of 3 decimal places, 1/600 = 0.16666666666 (more significant
figures than can be displayed in the current format) is displayed as 0.00167.
This is rounded to 5 (not 3) decimal places.
/2
In the display
Keystrokes
Result
Decimal places
Sci. notation
Sig. figs
3 C
16=
1 60 =
1 600 =
1 6000 =

0.000

N/A

N/A

0.167
0.0167
0.00167
0.00016
7

3
4
5
6

1.67 10-1
1.67 10-2
1.67 10-3
1.67 10-4

3
3
3
3

p42: To specify the number of displayed decimal places:

/0.5

Inaccurate information.
/0.5
eg, with a display setting of 3 decimal places, the results of the calculations 1/60, 1/600 and
1/6000 should be displayed (just like Excel does) as 0.017, 0.002 and 0.000 respectively.
However, the results are displayed to 3 significant figures, not 3 decimal places.
/2
Keystrokes

Result
3 C

16=
1 60 =
1 600 =
1 6000 =

In the display
Decimal places
Sci. notation

Sig. figs

0.000

N/A

N/A

0.167
0.0167
0.00167
0.00016
7

3
4
5
6

1.67 10-1
1.67 10-2
1.67 10-3
1.67 10-4

3
3
3
3

Another example: with a display setting of 4 decimal places, the results of the calculations
1/60, 1/600 and 1/6000 should be displayed (just like Excel does) as 0.0167, 0.0017 and
0.0002 respectively. However, the results are displayed to 4 significant figures, not 4
decimal places.
In the display
Keystrokes
Result
Decimal places
Sci. notation
Sig. figs
4 C
16=
1 60 =
1 600 =
1 6000 =

0.0000

N/A

N/A

0.1667
4
1.667 10-1
0.01667
5
1.667 10-2
0.001667
6
1.667 10-3
0.000166
7
1.667 10-4
7
p42: To specify the number of displayed decimal places:

4
4
4
4
/0.5

Pressing
This doesnt provide a best estimate it calculates the exact result. However, it displays
as many digits as required by eliminating trailing zeroes from the result.
/2
Partially inaccurate information.
/0.5
Keystrokes
Result
C
1 25 =
1 250 =
1 2500 =

0
0.04
0.004
0.0004
p42: To specify the number of displayed decimal places:

/0.5

is
Accurate information.

/0.5

p42: Displaying the Full Precision of Numbers

/0.5

After releasing these keys, hold


Accurate information.

. The decimal point is not shown.


/0.5

(iii)

The maximum number of decimal places is 12.


Use Displaying the Full Precision of Numbers. eg, calculate 1/3 & check.

/1

(iv)

The maximum number of digits is 12.


Using Displaying the Full Precision of Numbers. eg, calculate 1/3 & check.

/1

QUESTION 4
Dependent variable:
Independent variables:

[10 marks]
Imp (level of contaminants, ppm)
Co, Vis

/0.5
/0.5

Note
The dependent variable is level of contaminants, NOT Average level of contaminants.
All contaminant values are in ppm (not %).
The pivot tables template (Lecture 2 Slides 29 & 30, & Week 3 Tutorial) provides a systematic approach to
interpreting pivot tables.

Suitable pivot table(s)

/2

For comparison purposes, its important to report the mean, rather than the sum, of contaminants because the
different sample sizes within the different groupings will affect the sum.

Overall
Over all 80 shipments from both factories, the mean contaminant level was 25.0 ppm.

/1

Factory
Overall, the 40 Factory B shipments had a higher mean contaminant level (25.6 ppm: 5% higher) than the 40
Factory A shipments (24.4 ppm).
/1
At the 2 higher thickness categories, B had a higher mean contaminant level than A.
/0.5

At the 2 lower thickness categories, A had a higher mean contaminant level than B.

/0.5

Thickness

Overall, the mean contaminant level per shipment was higher as thickness increased through the lowest 3
categories, thickness 50-74 having the highest contaminant level. However, mean contaminant level declined
slightly for the highest thickness.
/1
[Compared with 0-24 thickness, 25-49 was 6.3% higher, 50-74 was 7.8% higher, 75-100 was only 4.8% higher.]
For A, the higher the thickness, the lower the shipments mean contaminant level.
/0.5

For B, the higher the thickness, the higher the shipments mean contaminant level.

/0.5

Etc
1 mark for each extra worthy point to a maximum of
/2
The lowest mean contaminant level was 12.7 ppm for B at 0-24 thickness; the highest mean contaminant
level was 36.0 ppm for B at 75-100 thickness.
Bs positive relationship between thickness and contaminants and As negative relationship tend to cancel
each other with the result that the combined (A & B) shipments at a particular thickness level have fairly
similar means. These means range from 23.8 ppm to 25.7 ppm, about an 8% variation.
For A, the lowest contaminant level occurred for thickness 75-100.
For B, the lowest contaminant level occurred for thickness 0-24.
For A, the highest contaminant level occurred for thickness 0-24.
For B, the highest contaminant level occurred for thickness 75-100.
A has a higher range of thickness category mean values (23.3 ppm) than B (21.1 ppm).
NB, you were not asked about
recommendations for improvement.
reasons that the values were as the pivot table showed.
trend, which refers to time series.
We dont have information here to enable us to make judgements about causality.
Marker judgement will be required for a non-pivot table approach.
QUESTION 5
(a)

(i)

[(3+2) + 4 + 2.5 + (3.5+3) = 18 marks]

log a ( 3 x2 )log a ( 4x )=log a 2

{Note, for the logs to be defined, 3x 2 > 0 x > 2/3 and 4 x > 0 x < 4. ie, 2/3 < x < 4.}

3 x 2
log a 2
4 x

log a

3x 2

2
4 x

3x 2 8 2 x
5 x 10
x 2
(ii)

If logax = y, then ay = x.
For the logarithms to be defined, we require
a > 0. (A real number too.)
a 1 (because ay always = 1 if a = 1).

/1
/1

/1

/1
/1

NB, 0 < a <1 is permissible. eg, log0.514 = -3.807 0.5-3.807 = 14.


(b)

Does (logbx)/(logby) give the same answer no matter what is the value of b?
The marks are awarded here for showing working.
NB, b 1.

/4

logb x = loga x/logab

Change of base formula (a, b > 0 and a, b 1)


Transliterating: b y; a b
gives
logyx = logb x/logby
ie,
(logbx)/(logby) = logyx
x, y > 0
Answer: Yes.
No matter what the value of b (provided b > 0, b 1 and x, y > 0), the answer depends only on the
values of x and y.
Alternatively

Let c = logy x
So, yc = y^logy x = x
Take logb of b.s.
logb x = logb yc = c logb y
So, c = logb x / logb y = logy x
Answer: Yes.
No matter what the value of b (provided b > 0 and b 1),
Alternatively

logb x = loga x/logab


Change of base formula (a, b > 0 and a, b 1),
So, [logb x] / [logb y]
= [(loga x)/(logab)] / [(logay)/(logab)]
= [(logax)/(logab)] (logab)/(logay)
= (logax) / (logay)
Answer: Yes.
No matter what the value of b (provided b > 0 and b 1),

(logb x)/(logb y) = (loga x)/(loga y)


If a = 10 (for example),
logb x = log10 x/log10 b
So, [logb x] / [logb y]
= [(log10 x)/(log10 b)] / [(log10 y)/(log10 b)]
= [(log10 x)/(log10 b)] (log10 b)/(log10 y)
= (log10 x) / (log10 y)
NB, if the result has been shown to be true just for specific values of a or b or x or y, the result has not
been shown to be true in general: maximum 2 marks.
(c)

(d)

ax a x
= [ax (ax)0.5)] / 3a1 x
1x
3a
= (1/3) ax a0.5x / a1 x
= (1/3) ax + 0.5x (1 x)
= (1/3) ax + 0.5x 1 + x
= (1/3) ax + 0.5x 1 + x
= a2.5x - 1 / 3
(i)

/0.5
/0.5
/0.5
/0.5
/0.5

Lecture 3, Slide 45: unlimited exponential growth y = abrx


Growth factor for any 2 consecutive terms: from x to x+1 is br.
N = abrt.
Growth factor (constant multiplicative ratio) for any 2 consecutive terms: from t to t+1 is b r.

10

Yes.
/0.5
The growth would be well-modelled by an exponential
equation.
because
the data show that there is an almost constant multiplicative
ratio (~1.0304) between successive terms.
/3
Alternatively, the exponential regression equation has R 2 1.
{Many students described the growth as linear. However, for
linear growth, the increase from week to week would have to be
the same amount. Here, increase from week to week is rising.}
Maximum 1 mark for any sensible comment about linear.

NB unlimited exponential growth is of the form y = abrx Even when

the growth factor br is very small,


the growth is modelled fairly well by a linear equation,
if there is a constant multiplicative ratio for any 2 consecutive terms, growth is exponential.
Exponential growth is NOT synonymous with rapid growth.
Not all curved growth patterns are exponential.
eg, a bank account earning 0.0001% pa grows exponentially.
{An acceptable alternative approach is an exponential regression line of best fit:
N = 11,999.99429e0.03000t, with R2 = 0.99999999 1.}
(ii)

After 20 weeks, there were 21,865 ants. Using an annual growth factor of
1.0304
gives an estimate of 21,865 1.030410 = 29,499 ants.
1.03045
gives an estimate of 21,865 1.0304510 = 29,513 ants.
1.0305
gives an estimate of 21,865 1.030510 = 29,528 ants.
/3
{Exponential regression line of best fit: N = 11,999.99429e0.03000t. t=30
29,515 ants.}
Deduct 0.5 if not whole numbers.
May be rounded up or down.
Allow consequential marks for other models.
Award 0 marks for simply clicking to extend the N values in the spreadsheet (unless some
plausible basis is given for such a projection). In doing so, do you have any idea what algorithm
Excel is using?

QUESTION 6
Exhibit 6.1
Item
Milk (litre)
Bread (480g loaf)
Butter (500g)
Total

[(2+2+2) + (1+1+1) + (3+4) = 16 marks]


1985
Price Quantity
p0
q0
$0.64
208
$0.65
104
$0.50
29
$1.79
341

2005
Price Quantity
pt
qt
p0q0
ptqt
p0qt
ptq0
$1.20
220 $133.12 $264.00 $140.80 $249.60
$1.50
99 $67.60 $148.50 $64.35 $156.00
$2.00
25 $14.50 $50.00 $12.50 $58.00
$4.70
344 $215.22 $462.50 $217.65 $463.60

11

p q
p q
p q

p q

LI t
Laspeyres Price Index

PI t
Paasche Price Index
(a)

100

100

2005 index
(i)
Laspeyres
(ii) Paasche
(iii) Budget

(463.60 / 215.22)*100 = 215.41


/2
(462.50 / 217.65)*100 = 212.50
/2
(462.50 / 215.22)*100 = 214.90
/2
= current dollar amount spent on the basket of dairy items in 2005 as a
percentage of the current dollar amount spent in 1985.
NB, the answer (index) is 214.90.

(b)
(i)

(c)

Laspeyres index: 215.41%


A 115.41% rise in price for the basket of goods from 1985 to 2005.

/1

(ii)

Laspeyres: base period weights become outdated.


Paasche: its inconvenient to recompute weights often.
Budget: it portrays quantity AND price changes, when we only want to measure price
changes.
/1

(iii)

Laspeyres: same weights for both periods allow comparison of prices.


[Updating base period weights is not easy.
It is not an advantage that it is more widely used.]
Paasche: same weights for both periods allow comparison of prices.
weights are up to date.
Budget: compares the dollar values spent at both times.

(i)

/1

Let the CPI value now be 100.


After 15 years,
CPI = 1.02515 100
= 144.829817
real value of $1
= 100(value in current dollars)/current CPI
= 100(1)/144.829817 = $0.690466
ie, a 30.9534% 31% drop.
After 28 years,
CPI = 1.02528 100
real value of $1

= 199.649502
= 100(value in current dollars)/current CPI
= 100(1)/199.649502= $0.500878
ie, a 49.9122% 50% drop.

So, the AFPH is accurate as a percentage to 0 decimal places.

/2.5
/0.5

(ii)

12

The spreadsheet from (i) is shown here.


Values in column B:
CPI, increasing by a factor of 1.025 each year.
Values in column C:
100(value in current dollars)/current CPI
Values in column D:
the % drop in the dollar since t = 0.

Working
5.076%
(1 or 2 decimal places is OK.)

/3
/1

13

QUESTION 7

[6 + 1 + (3+1+2+2) = 15 marks]

(a)&(b) Supply function is of the form: P = c + dQ


When P = $24, Q = 0. 24 = c + d0 c = 24
P = 24 + dQ
If P increases by 1, Q increases by 5 units.
When P = $24+1, Q = 0 + 5 = 5.
25 = 24 + d5
P = 24 + 0.2Q
(or Q = 120 + 5P)

d = 0.2
/3

Deduct 0.5 marks


for each unlabelled axis.
for each axis with the wrong values.
for showing Q values < 0.
A common mistake is to have values 1, 2,
3, etc on the horizontal axis.
graph /3
(c)
(d)

From the graph, when P = 45, Q 105.


Algebraically, when P = 45, Q = 5P 120 = 545 120 = 105.
(i)

Price elasticity of supply for the supply function is s = (Q/P)(P/Q)


P = 24 + 0.2Q
0.2Q = P 24
Q = P/0.2 24/0.2
Q = 5P - 120
Q = 5P - 120
At Q = 35, P = 24 + 0.235 = $31.
Q/P = 5 is the gradient of the supply function (which is linear).
So, s = (Q/P)(P/Q)
= 5(31/35) = 31/7 = 4.43
[BTW, Q/P = 1/(P/Q) = 1/0.2 = 5]

(ii)

(iii)

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At Q = 35, P = $31, s = 4.43.


Interpretation of price elasticity of supply value:
at a price of $31,
a 1% increase in price
will lead to a 4.43% increase in supply.

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No.
The interpretation of the slope of a linear function is that, for any increase of 1 in the x
variable, the y variable increases by a constant amount the slope value.

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elasticity

% change in y
% change in x

The interpretation of price elasticity of supply is that, for any increase of 1 percent in the x
variable (P), the y variable (Q) increases by s percent.
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(iv)

No.
Supply: if price increases, supply increases. The supply function has a positive slope.
So, you would expect a positive value for price elasticity of supply.
Demand: if price increases, demand falls. The demand function has a negative slope.
So, you would expect a negative value for price elasticity of demand.

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