Mathematical Economics
ECO 212/ 212 E
Test 1
06 May 2021
Time: 2 hours 30 minutes
Subject:
Mathematical Economics 2A
Marks: 25
This paper consists of 2 pages including cover page
Internal Examiners:
Mr E. Mutambirwa
Mr Z. Sita
INSTRUCTIONS:

Answer ALL questions, showing clearly all the calculations.

Use clearly drawn diagrams where necessary
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
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Calculators are allowed
Answers must be rounded off to two (2) decimal places.
Scan the script and convert it into one PDF document and save it with surname
and student number.

Make sure the scanned PDF document is clear before uploading on the link
provided on blackboard.
Question 1
The demand and supply functions for a good are given as:
𝑄𝐷 = 200 − 2𝑃`𝐷 and 𝑄𝑆 = 2𝑃𝑆 − 20
a) Find the equilibrium price and quantity
[4]
b) Graphically illustrate the demand and supply functions
[4]
c) Find the inverse demand and supply functions
[3]
Question 2
Given total revenue 𝑇𝑅 = 80𝑥 and total cost 𝑇𝐶 = 30𝑥 − 200
a) Find the profit function
[2]
b) Find the break-even level of output
[3]
c) Graphically illustrate the total revenue function and total cost function
[3]
Question 3
Using elimination method to solve for the equilibrium level of income (Y) and the interest
rate (i), given IS and LM models
𝐼𝑆: 0.3𝑌 + 100𝑖 − 252 = 0
𝐿𝑀: 0.25𝑌 − 200𝑖 − 193 = 0
Grand total = 25 marks
[6]