Review before Mid Exam

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Exercise 1.
The quantity demanded of a product is 107 units when
P = 30. The quantity demanded, Q, drops by 3 units
for every unit increase in price.
a. Write down the equation of the demand function in
the form Q = f(P).
b. Plot the graph of the demand function.
c. From the graph, estimate the quantity demanded
when P = 23.
d. Confirm your answer in part (c) algebraically.

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Exercise 2.
Given the demand and supply functions, P = 75 – 3Q
and Q = -15 + 0.5P, respectively:
Algebraically, calculate the equilibrium price and
quantity.
a. If a tax of 15.05 per unit is imposed, calculate the
new equilibrium price and quantity.
b. Calculate the distribution of tax.
c. Prove your answer in part (c) by using the
comparison of slopes method.

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Exercise 3.
A straight line passes through the point P and Q. The
coordinates of P and Q in the form of (x,y) are (6, 16)
and (10, 30).
a) Derive the equation of that straight line.
b) Another line has the same slope but passes point
A(6,10). Write the equation.
c) Find the vertical and horizontal intercepts for both
lines.
d) Draw both lines in a graph (only at quadrant I, x and y
positive values).

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Exercise 4.
The demand and supply functions for a good are given
by the equations:
Pd = -(Q+4)2 + 100 and Ps = (Q+2)2
a. Sketch each function on the same diagram.
b. Calculate the equilibrium price and quantity.

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Exercise 5.
A firm has the following demand function:
5Q = 1200 - 5P
The firm has a fixed cost of $300 and unit cost of $25.
• What is the breakeven quantity for this company?
• Calculate the total revenue when the company
managed to sell 15 units
• What is the maximum total revenue for the
company?

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Linier Programming Application
An electronics company has a plan to attract new customer through an
advertising campaign next year. Totally, the company wants to place 10
ads in 2 newspapers (The Sentinel and the Tribune). Each ad in the
Sentinel costs $200 and it will be read by 2,500 people. Whether each ad
in the Tribune costs $100 and it will be read by 1,500 people. The company
wants at least 16,000 people to read its ads. However, the Tribune will not
accepted more than 4 ads from the company and it is impossible to place a
negative number of each ad
a) Write down the objective equation and the constraint equations
b) Graph the equations and find the result graphically
c) Calculate: how many ads should it place in each newspaper in order
to minimize the advertising costs?
d) Calculate: what is the minimum cost for the advertising campaign?

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PROTRAC – Case (1)
PROTRAC Inc. produces two lines of heavy equipment.
Using economic forecasts for next month, PROTRAC’s
marketing manager has judged that during that period it will
be possible to sell as many E-9s of F-9s as the firm can
produce.

Management must now recommend a production target for

next month. That is, how many E-9s and F-9s should be
produced?

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PROTRAC – Case (2)
PROTRAC Data

1. PROTRAC will make a profit of $5000 on each E-9

that is sold and $4000 on each F-9.

2. Each product is put through machining operations in

both department A and department B.

3. For next month’s production, these two department

have 150 and 160 hours of available time,
respectively. Each E-9 uses 10 hours of machining in
department A and 20 hours of machining in
department B, whereas each F-9 uses 15 hours in
department A and 10 Hours in department B.
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PROTRAC – Case(3)
PROTRAC Data
4. Testing of finished products is performed in a third
department. Each E-9 is given 30 hours of testing and
each F-9 is given 10. The total testing hours cannot
fall below 135.
5. In order to maintain the current market position, top
management has decreed the operating policy that it is
necessary to build at least one F-9 for every three E-9s
produced.
6. A major customer has ordered a total of at least five E-
9s and F-9s (in any combination whatever) for next
month, and so at least that many must be produced

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