1070 final exam prep

Final exam prep exercises winter 2022

1. Lines on two points

1.1. When the number of sanitation workers was 117 they were able to
remove 130 tons of refuse weekly. When they numbered 143, they could
remove 182 tons weekly. Assuming linear relationship between number of
workers and tons of refuse, find the equation of the line that relates the two
variables.

2. break even

3. Pivoting

𝑥 + 2 𝑦 + 𝑧 = 10
3.1. Use pivoting to solve this system of equations: 2𝑥 + 𝑦 + 3𝑧 = 8
3𝑥 + 6𝑦 + 4𝑧 = 16
3.2. Solve the following system using Gauss-Jordan Elimination:
𝑥 +𝑦 +𝑧 =5
2𝑥 +2𝑦 +3𝑧 = −1
2𝑥 −𝑦 +2𝑧 =7
This should be solved by pivoting:
[1] 1 1 5 1 1 1 5 1 1 1 5
1 2 3 −1 → 0 1 2 −6 → 0 1 2 −6
2 −1 2 7 0 −3 0 −3 ÷ −3 0 [1] 0 1

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1 0 1 4 1 0 1 4 1 0 0
→ 0 0 2 −7 ÷ 2 → 0 0 [1] − → 0 0 1 −
0 1 0 1 0 1 0 1 0 1 0 1
𝑥=
hence 𝑦=1
𝑧=−

3.3. Use the pivoting method to solve this system of equations

𝑥 +𝑦 = 2
𝑥 +2𝑦 = 3
2𝑥 +3𝑦 = 5
3.4. Use the pivoting method to solve this system of equations
𝑥 +2𝑦 = 2
2𝑥 +4𝑦 = 2
3.5. Use the pivoting method to solve this system of equations
𝑥 −𝑧 =2
𝑥 +𝑦 −𝑧 =3

4. Word problems for linear systems

4.1. A ski resort charges $40 for an adult lift ticket and $25 for a child’s lift
ticket. One particular day they sold 700 lift tickets for a total of $23,275. How
many of the tickets were adult and how many were for children? (Show the
work!)
4.2. Sue paid $8,000 for her car. Seven years later her car was valued at
$4,500. Assuming a linear relationship, find the equation relating car’s value
and age, and determine what the car will be worth if Sue kept it for 10 years.
4.3. Mrs Wilson’s chocolate chip cookies cost her $0.45 each to produce. She
then sells them for $1.25 each. Her fixed weekly expenses are $72. State the

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weekly profit function. How many cookies must be made and sold each week if
she is to: break even; realize profit of $24?

5. Array algebra
1 −3
5.1. For the array 𝐴 = find 𝐴 + 3𝐴 − 𝐼, where 𝐼 is an identity array.
3 4
1 −3 1 −3 1 −3
Solution: 𝐴 + 3𝐴 − 𝐼 = 𝐴 ∗ 𝐴 + 3𝐴 − 𝐼 = ∗ +3 −𝐼
3 4 3 4 3 4
1 −3 1 −3 −8 −15 3 −9 1 0
= ∗ = + −
3 4 3 4 15 3 ∗ (−3) + 4 ∗ 4 = 7 9 12 0 1
−8 −15 3 −9 1 0 −8 + 3 −15 − 9 1 0
= + − = −
15 7 9 12 0 1 15 + 9 7 + 12 0 1
−5 −24 1 0 −6 −24
= − =
24 19 0 1 24 18
5.2.

6. Inverse arrays

1 1 1
6.1. Find the inverse of: 2 1 1 and use it to solve this system of equations:
2 2 3
𝑥 +𝑦 +𝑧 =7
2𝑥 +𝑦 +𝑧 =5 .
2𝑥 +2𝑦 +3𝑧 = −5
1 1 1 1 0 0
The augmented array: 2 1 1 0 1 0
2 2 3 0 0 1
Now pivot, until the original array will be replaced with an identity array.
1 [1] 1 1 0 0
2 1 1 0 1 0 →
2 2 3 0 0 1
1 1 1 1 0 0
1 0 0 −1 1 0 →
2−2∗1 2−2∗1 3−2∗1 0−2∗1 0−2∗0 1−2∗0

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1 1 1 1 0 0 0 1 1 2 −1 0
[1] 0 0 −1 1 0 → 1 0 0 −1 1 0
0 0 1 −2 0 1 0 0 [1] −2 0 1
0 1 0 4
−1 −1 1 0 0 −1 1 0
1 0 0 −11 0 → 0 1 0 4 −1 −1
0 0 1 −20 1 0 0 1 −2 0 1
−1 1 0
The inverse array is 4 −1 −1
−2 0 1
𝑥 +𝑦 +𝑧 =7
The system 2𝑥 +𝑦 +𝑧 =5 is equivalent to an array equation:
2𝑥 +2𝑦 +3𝑧 = −5
1 1 1 𝑥 7 𝑥 −1 1 0 7 −2
2 1 1 ∗ 𝑦 = 5 . Therefore 𝑦 = 4 −1 −1 ∗ 5 = 28
2 2 3 𝑧 −5 𝑧 −2 0 1 −5 −19
1 −1 0 −2 −3 1
6.2. Given 𝐴 = 1 0 −1 and 𝐴 = −3 −3 1 .Write the matrix equation for
6 −2 −3 −2 −4 1
𝑥 − 𝑦 = 4
the following system of linear equations: 𝑥 − 𝑧 = 6
6𝑥 − 2𝑦 − 3𝑧 = 2

How to check if an array is an inverse of another?

6.3. Solve that system using𝐴 .
NO WILL BE GIVEN FOR ANY OTHER METHOD.
Solution:
Definition: two array, A & B are mutually inverse one of another if A * B = ID
A*X=R -> X = A-1 * R
1 −1 1 𝑥 4
The system may be written as an array equation 1 0 −1 × 𝑦 = 6
6 −2 −3 𝑧 2
𝑥 −2 −3 1 4 −24
The solution is 𝑦 = −3 −3 1 × 6 = −28
𝑧 −2 −4 1 2 −30

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−1 2 3 −2 3 2
6.4. Is any of the three arrays , , an inverse of any
−2 3 2 −1 2 1
other?
B) With the help of the conclusion of the part A), solve two of the three
systems
−𝑥 +2𝑦 = 2 3𝑥 −2𝑦 = 3 3𝑥 +2𝑦 = 3
, , without pivoting.
−2𝑥 +3𝑦 = 3 2𝑥 −𝑦 = 2 2𝑥 +𝑦 = 2
Solution: two arrays are mutually inverse if their product is an identity array.
−1 2 3 −2 (−1) ∗ 3 + 2 ∗ 2 (−1) ∗ (−2) + 2 ∗ (−1)
* =
−2 3 2 −1 (−2) ∗ 3 + 3 ∗ 2 (−2) ∗ (−2) + 3 ∗ (−1)
1 0 −1 2 3 −2
= = 𝐼, hence , are mutually inverse.
0 1 −2 3 2 −1
𝟏
If 𝑨 ∗ 𝑿 = 𝑹, then 𝑿 = 𝑨 ∗𝑹
−𝑥 +2𝑦 = 2 −1 2 𝑥 2
The system may be rewritten as ∗ 𝑦 =
−2𝑥 +3𝑦 = 3 −2 3 3
𝑥 −1 2 2
Therefore 𝑦 = ∗
−2 3 3
−1 2 3 −2 𝑥 3 −2 2 0
But = , hence 𝑦 = 2 −1 ∗ 3 = 1
−2 3 2 −1
3𝑥 −2𝑦 =3 3 −2 𝑥 3
Similarly, the system may be rewritten as ∗ 𝑦 =
2𝑥 −𝑦 =2 2 −1 2
𝑥 3 −2 3 −1 2 3 1
Therefore, 𝑦 = ∗ = ∗ =
2 −1 2 −2 3 2 0
6.5.

7. Linear programming – setup

7.1. Format the following problem in mathematical terms. DO NOT SOLVE!

Translate from the plain language into math,
Construct the mathematical model
A political scientist has received a grant to fund a research project involving
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voting trends. The budget of the grant includes $1,620 for conducting door-to-
door interviews the day before an election. Under-graduate students and
graduate students will be hired to conduct the interviews. Each undergraduate
student will conduct 18 interviews and be paid $60. Each graduate student will
conduct 25 interviews and will be paid $90. Due to limited transportation
facilities, no more than 20 interviewers can be hired. University regulations
state that there can be no more than twice as many undergraduate students
hired as graduate students. How many undergraduate students and graduate
students should be hired in order to maximize the number of interviews that
will be conducted?
Solution:
Define precisely all variables used:
u = the number of under-graduates,
g =the number of graduates.
State the objective function. The total number of interviews = 18u + 25g = I(u, g)
List all constraints that apply.
The total budget: 60u + 90g ≤ 1620
no more than 20 students: u + g ≤ 20
no more u than twice of g : u ≤ 2g, → u – 2g ≤ 0. u, g ≥ 0

8. Linear programming – solving

8.1. A merchant plans to sell two models of home computers at costs of $250
and $400, respectively. The $250 model yields a profit of $45 and the $400
model yields a profit of $50. The merchant estimates that the total monthly
demand will not exceed 250 units. Find the number of units of each model that

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should be stocked in order to maximize profit. Assume that the merchant does
not want to invest more than $70,000 in computer inventory.
Set-up, translation:
Variables: x = the number of $250 model, y = the number of $400
The translation:
x≥0 x≥ 0 requirements

1 1 ≤ 250
quantity

250 400 ≤ 70000

cost

45 50 maximize
profit

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x≥0 x≥ 0

+y ≤ 250
x

+400y ≤ 70000
250x

+50y The
45x
objective
function,
to be
maximized

The feasible region:

250x + 400y = 70000
∗
X-intercept, y = 0, 250x=70000, 𝑥 = = = = 70 ∗ 4 = 280
∗
y-intercept: x = 0, 400y = 70000, 𝑦 = = = = 7 ∗ 25 = 250 − 75 =

175
1 1 250 [1] 1 250
Point C requires pivoting: → →
250 400 70000 ÷ 50 5 8 1400
[1] 1 250 [1] 1 250
=
5 − 5 8 − 5 1400 − 5 ∗ 250 0 3 1400 − 1000 − 250
1 1 250 1 1 250 1 0 200
= → → → x = 200, y = 50
0 3 150 ÷ 3 0 [1] 50 0 1 50
Comparison:

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45x + 50 y

0
A = (0, 0)

45*250 =
B = (250, 0)
11250
45*200+50*50 The maximum
C = (200, 50)
= 11500
50*175 =
D = (0, 175)
8750

The conclusion: the maximum profit is attained when 200 pieces of $250 model
and 50 pieces of $400 model are stocked.
8.2. A fruit grower has 150 acres of land available to raise two crops, A and B.
It takes one day to trim an acre of crop A and two days to trim an acre of crop
B, and there are 240 days per year available for trimming. It takes 0.3 day to
pick an acre of crop A and 0.1 day to pick an acre of crop B, and there are 30
days per year available for picking. Find the number of acres of each fruit that
should be planted to maximize profit, assuming that the profit is $140 per acre
for crop A and $235 per acre for crop B.
8.3. A farming cooperative mixes two brands of cattle feed. Brand X costs $25
per bag and contains 2 units of nutritional element A, 2 units of element B, and
2 units of element C. Brand Y costs $20 per bag and contains 1 unit of
nutritional element A, 9 units of element B, and 3 units of element C. Find the
number of bags of each brand that should be mixed to produce a mixture
having a minimum cost per bag. The minimum requirements of nutrients A, B,
and C are 12 units, 36 units, and 24 units, respectively.
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8.4. Two gasolines, type A and type B, have octane ratings of 80 and 92,
respectively. Type A costs $0.83 per liter and type B costs $0.98 per liter.
Determine the blend of minimum cost with an octane rating of at least 90.
[Hint: Let x be the fraction of each liter that is type A and y be the fraction that
is type B.]
8.5. Two grains, barley and corn, are to be mixed for animal food. Barley
contains 1 unit of fat per pound, and corn contains 2 units of fat per pound. The
total number of units of fat in the mixture are not to exceed 12 units. No more
than 6 pounds of barley and no more than 5 pounds of corn are to be used in
the mixture. If barley and corn each contain 1 unit of protein per pound, how
many pounds of each grain should be used to maximize the number of units of
protein in the mixture?
8.6. A sales representative covers territory in Iowa and Kansas. Her daily
travel expenses average $120 in Iowa and $100 in Kansas. Her company
provides an annual travel allowance of $18; 000. Her company also stipulates
that she must spend at least 50 days in Iowa, and 60 days in Kansas per year. If
sales average $3; 000 per day in Iowa, and $2; 500 per day in Kansas, how
many days should she spend in each state to maximize sales?
3 𝑥 + 𝑦 ≥ 60
8.7. Graph the region determined by: 𝑥 + 𝑦 ≥ 18 .
x ≥ 0, y ≥ 0
Find the minimum value of 𝑃 = 1 𝑥 + 30𝑦 subject to the above constraints.

9. Domain & range

9.1. For
𝑓(𝑥) = 6 + √7 − 𝑥

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3𝑥 𝑖𝑓 𝑥 < 1
𝑓(𝑥) =
10𝑥 − 𝑥 𝑖𝑓 1 < 𝑥 < 2
( ) ( )
find the domain, the range, intercepts and .

9.2.

10. The difference quotient

( ℎ) ( )
10.1. Given that 𝑓(𝑥) = , 𝑓(𝑥) = − 𝑥 find and simplify
ℎ

10.2.

11. Quadratic optimization

11.1. New Sports Bike. You have designed a new style of sports bicycle! Now
you want to make lots of them and sell them for profit. Your costs are going to
be: $700,000 for manufacturing set-up costs, advertising, etc and $110 to make
each bike. Based on similar bikes, you can expect sales to follow this "Demand
Curve": q = 70000 – 200p, where q is the number of bikes sold and p is the
price. So ... what is the best price? And how many should you make?
11.2. A butcher bought some pheasants for £100.00. Had each cost £1 less, he
would have bought 5 more. How many pheasants did he buy?
11.3. A group of acquaints went to a restaurant for a meal. When the bill for
£175 was brought by a waiter, two of the cheeky ones from the group just
sneaked off before the bill was paid, which resulted in the payment of extra
£10 by each remaining individual. How many were in the group at first?

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12. Nonlinear system

2x = y + 8 𝑦= +1
12.1. Solve the following non-linear systems: , .
𝑥 = 5 (𝑥 + 1) 𝑦=

𝑥2 − 𝑦2 = 1 𝑥2 − 2𝑥 + 𝑦 − 7 = 0 81𝑥2 − 72𝑦 = 0 3𝑥2 − 3𝑦 = 0

, , , ,
2𝑥2 − 𝑦2 = 𝑥 + 3 3𝑥 − 𝑦 + 1 = 0 −72𝑥 + 16𝑦 = 0 −3𝑥 + 2𝑦 = −1

4𝑥3 − 2𝑥 − 2𝑦 = 0
4𝑦3 − 2𝑥 − 2𝑦 = 0

Solution:

𝑦= +1 = +1
One variable must be eliminated:
𝑦= 𝑦=

Now we solve the equation that contains only one variable: = +1 ∙ (𝑥 − 1)

1=𝑥 +𝑥−1 → 𝑥 +𝑥−2=0 → (𝑥 + 2)(𝑥 − 1) = 0

Two solutions for x: x = -2, the other is x = 1, but this must be rejected since x – 1
Is in the denominator.
Therefore, there is only one solution: x = -2.
Now we may find y from the unused equation 𝑦 = = =− .

Thus, the solution is (x, y) = −2, −

Solution:
𝑥 −𝑦 =1 𝑒1 = 𝑒1 𝑥 −𝑦 =1
→
2𝑥 − 𝑦 = 𝑥 + 4 𝑒2 = 𝑒2 − 𝑒1 𝑥 =𝑥+4
At first we solve the equation for x : 0 = 𝑥 − 𝑥 − 3

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√
( )± ( ) ( ) ±√ ±√
𝑥 = ≈ +2.30
𝑥= = = =
√
𝑥 = ≈ −1.30

Now we need to use the second equation to find y: 𝑥 − 𝑦 = 1

𝑦 =𝑥 −1=
√
𝑦 =𝑥 −1= − 1 ≈ 2.3 − 1

√
𝑦 =𝑥 −1= − 1 ≈ 1.3 − 1

𝑦 = ±√2.3 − 1
𝑦 = ±√1.3 − 1

Solution:
𝑥 −𝑦 =1 𝑒1 = 𝑒1 𝑥 −𝑦 =1
→
2𝑥 − 𝑦 = 𝑥 + 3 𝑒2 = 𝑒2 − 𝑒1 𝑥 =𝑥+3
At first we solve the equation for x : 0 = 𝑥 − 𝑥 − 2 = (𝑥 − 2)(𝑥 + 1)
𝑥 =2
𝑥 = −1
Now we need to use the second equation to find y: 𝑥 − 𝑦 = 1
𝑦 =𝑥 −1=
𝑦 = 𝑥 − 1 = (2) − 1 = 3
𝑦 = 𝑥 − 1 = (−1) − 1 = 0
𝑦 = ± √3
𝑦 =0

12.2. Given below are a demand function and a supply function for a product,
where p represents price per item (in dollars) and q represents the number of
items. Find the equilibrium point.

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12.2.1. D: 𝑝 = 400 − 𝑞 S: 𝑝 = 20𝑞 + 100

12.2.2. D: 𝑞= 100 − 𝑝 S: 𝑞 = − 10
,
12.3. The demand for q pounds of tuna per week is given by 𝑝 = .
, where

200 ≤ 𝑞 ≤ 800.
12.3.1. Find the total revenue function 𝑅(𝑞).
12.3.2. Find the break even quantity if the total cost is $1,000.
12.4. A company pays for its employees’ dental coverage at an annual cost 𝐶
given by 𝐶(𝑞) = 1,000 + 100 𝑞 where q is the number of employees covered,
and C(q) is in dollars.
If the government subsidizes coverage by an annual dollar amount of 𝑆(𝑞) =
50𝑞, at what number of employees does the company actually start making a
profit on dental coverage?

13. Exponential equations

13.1. 10 − 3 = 97. x = -2
Solution: 𝐥𝐨𝐠 𝒃 𝒂𝒑 = 𝒑 ∗ 𝐥𝐨𝐠(𝒂)
10 = 100
log(10 ) = log(100) = log(10 ) = 2 log(10)
−𝑥 log(10) = 2 log(10) ÷ log(10)
-x=2
x = -2

14. Logarithmic equations

14.1. 𝑙𝑜𝑔(𝑥 + 1) = 𝑙𝑜𝑔(4 )

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15. Rules for logarithms

15.1. Use the laws of logarithms to rewrite the following as a single logarithm
15.1.1. 𝑙𝑜𝑔(𝑥) + 𝑙𝑜𝑔(𝑥 + 2) − 3𝑙𝑜𝑔(2𝑥 + 5) .

15.1.2. ln(𝑥) + 4𝑙𝑛(𝑥𝑦 ) − ln(𝑦 ) = ln(𝑥) + ln((𝑥𝑦 ) ) + ln 8

15.1.3. 𝑝 × log(𝑠) = log(𝑠 ) log(𝑎 ∗ 𝑒) = log(𝑎) + log(𝑒)

15.1.4. ln(𝑥) + ln((𝑥𝑦 ) ) + ln 8 = ln 𝑥 × 𝑥𝑦 × 8 = ln

√

16. Rescheduling loans

16.1. John has gotten two loans, one of $559 payable in two moths and another
one of $7632 payable in 15 months. He would like to pay both of them in a
single payment 18 from now. What is this single payment if the nominal
interest rate is 6% compounded monthly?
Solution:
The principle of amortization of loans: the present values of both alternatives
must be the same.

. ∗ . ∗
𝑃 = 559 ∗ 1 + + 7632 ∗ 1 + = 7638.08$

. ∗
𝑃 =𝑥∗ 1+

𝑃 = 𝑃 is equivalent to: 7638.08 = 0.914136 x

the solution is: x≈8355.52
A solution with the help of the future value:
The principle: the future values of both alternatives must be the same: (two
years from now)

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. ∗ . ∗
𝐹 = 559 ∗ 1 + + 7632 ∗ 1 + =

. ∗
𝐹 =𝑥∗ 1+

8609.34 = 1.03038 x
x≈8355.52

17. Annuities -savings

17.1. Joan wants to have $10000 in her account AFTER 10 years, which is now
empty. The nominal interest rate is 7% compounded monthly. How much should
she pay per month in order to achieve this goal?

18. Annuities -interest rate

19. Annuities -loans

19.1. Jane inherited an apartment with unpaid mortgage of $122000, with

monthly payments of $1100 and the interest rate 4% compounded monthly.
How long will it take to pay off this debt?

20. Difference equations

20.1. Solve these difference equations:

20.1.1. 𝑦 = −3𝑦 + 8, 𝑦 = 1

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Solution:
𝑦 = −3𝑦 + 8, 𝑦 = 1
Find the equilibrium solution: 𝑦 = 𝑦 = 𝑒, 𝑒 = −3𝑒 + 8, e = 2
𝑦 = 𝑒 + (𝑦 − 𝑒) ∗ 𝑔 = 2 + (1 − 2) ∗ (−3) = 2 − (−3)
stable? Unstable? |g| = |-3| = 3 > 1, hence unstable.
monotone? Oscillatory? Oscillatory, since g = -3 < 0

20.1.2. 𝑦 = 𝑦 − , 𝑦 = 10

Solution: 𝑦 =𝑦 − .

The equilibrium: e = e – 3/2, -> 0=3/2, there is no solution;.

𝑦 = 10,

𝑦 = 𝑦 − = 10 − ,

𝑦 = 𝑦 − = 10 − − = 10 − 2 ∗ ,

𝑦 = 𝑦 − = 10 − 2 ∗ − = 10 − 3 ∗ ,

Now we may guess: 𝑦 = 10 − 4 ∗

Now we see the general pattern: 𝑦 = 10 − 𝑛 ∗

20.1.3. 𝑦 = − 𝑦 + 8, 𝑦 = 6

20.2. Spread of Information) A particular news item was broadcast regularly on

radio and TV. Let 𝑦 be the number of people who had heard the news within n
hours after broadcasting began. Sketch the graph of 𝑦 , assuming that it
satisfies the difference equation 𝑦 = .7𝑦 + 3000, 𝑦 = 0.
Solution:
𝑦 =.7𝑦 + 3000
𝑦 =.7𝑦 + 3000 = 3000
𝑦 =.7𝑦 + 3000 =.7∗ 3000 + 3000 = 1.7 ∗ 3000 = 5100
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𝑦 =.7𝑦 + 3000 =.7∗ 5100 + 3000 = 6570

The equilibrium: 𝑒 = .7𝑒 + 3000, 𝑒 = 10000
stable? Unstable?
monotone? Oscillatory?

20.3. (Radioactive Decay) The radioactive element strontium 90 emits particles

and slowly decays. Let 𝑦 be the amount left after n years. Then 𝑦 satisfies the
difference equation 𝑦 = .98𝑦 · Sketch the graph of 𝑦 if initially there are 10
milligrams of strontium 90.
20.4. (Price Equation) Laws of supply and demand cause the price of oats to
fluctuate from year to year. Suppose that the current price is $1.72 per bushel
and that the price n years from now, 𝑦 , satisfies the difference equation 𝑦 =
-.6𝑦 + 1.6. (Prices are assumed to have been adjusted for inflation.) Sketch
the graph of 𝑦 ·
20.5. (Population Growth) Under ideal conditions a bacteria population satisfies
the difference equation 𝑦 = 1.4𝑦 , 𝑦 = 1, where Yn is the size of the
population (in millions) after n hours. Sketch a graph that shows the growth of
the population.

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20.6. (Mortgage Planning) Suppose that the interest rate on a mortgage is 9%

compounded monthly. If you can afford to pay $450 per month, how much
money can you borrow?
Solution:
𝑑 = 𝑑 + 𝑟 ∗ 𝑑 − 450 = (1 + .09) ∗ 𝑑 − 450 = 1.09 ∗ 𝑑 − 450
The bank will not lend to anybody above his equilibrium value
𝑑 = 1.09 ∗ 𝑑 − 450

𝑒 = 1.09 ∗ 𝑒 − 450, 𝑒 = = 5000

.

suppose r = 5%, how much can one borrow now: 𝑒 = = 9000

.

20.7. A scholarship fund currently has $20,000 in it. It earns 4% interest every
year and 10% of the fund is given in scholarships every year. Also, $12,000 is
added to the fund each year from contributions. Give the difference equation
and solve it. If they want to give out more than 10% for scholarships each year
in order for the fund to reach a maximum of $100,000, what percentage can
they give away each year?
20.8. An individual earns an extra $2,000 each year and places this money at
the end of each year into RRSP in which both the original and interest in the
account are not subject to taxation. If the account has an annual interest rate
of 7% compounded annually, use difference equations to determine how much
is in the account at the end of 40 years?

21. Cobweb model

21.1. A particular market has supply and demand curves

qd,t = 90 – Pt qs,t = -30 + .6Pt - 1

Assume qdt = qst and P0 = 100. Assume that the market is at equilibrium.
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21.1.1. Find a difference equation for Pt and solve it

21.1.2. Find qs , P1, qs, P2, qs, P3, qs, and P4

1 2
21.1.3. Does the system converge to the equilibrium?
21.1.4. What is the equilibrium price? Quantity?

Solution:
Everything must be sold: 𝑞 , =𝑞 , , hence we obtain an equation for the evolution
od=f prices:
90 − (−30 + .6𝑝 )=𝑝.
𝑝 = 120 − .6𝑝 .
In this case |𝑔| = |−.6| = .6 < 1, hence the equation is stable. Next, g = -.6 < 0, hence
the solutions are oscillatory.
The equilibrium value: it is a constant solution, 𝑝 =𝑝 =𝑝 =𝑒
𝑒 = 120 − .6𝑒 → 1.6𝑒 = 120 → 𝑒= = 75
.

The solution for all t:

𝑝 = 𝑒 + (𝑝 − 𝑒) ∗ 𝑔 = 75 + (100 − 75) ∗ (−.6) = 75 + 25 ∗ (−.6) .
𝑝 = 120 − .6𝑝 = 120 − .6 ∗ 100 = 60.
𝑝 = 120 − .6 ∗ 𝑝 = 120 − .6 ∗ 60 = 120 − 36 = 84.

21.2. Given the demand and supply functions for the cobweb model as
follows, find the equilibrium price, determine whether the equilibrium is
stable and solve the difference equation.
21.3. qdt=19-6p,. qs1=-5+6p1-I. po=3.5
Findp1,p2,pJ,qs,1qs2,qsJ
21.4. qdt = 15 - 2 Pt qst = -3 + 5 Pt – 1, p0 = 4

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21.5. qdt = 20 - 2 Pt qst = -2 + Pt – 1, P0 = 5

21.6. qdt = 15 - 6Pt qst = 3Pt - 1 - 3 P0 = 1

21.7. qdt = 16 - 2 Pt. qst = - 4 + 4 Pt-I. Po= 4

21.8. qdt = 20 - 3 Pt, qst = -1 + Pt-I. Po= 6
21.9.

22. Market inventory model

22.1. = For the inventory market model:

qdt = 27-3p1, Po =7
Qst =-3 +2p1
Find, Po, P1, and P2 .
Solve the difference equation. Does it converge? If yes, what are the
equilibrium price and quantity?
22.2. For the given inventory market model:
1

qdt = 30-3p1
qs, = -2 +2p, p0 = 6
Solve the difference equation. Does it converge? If yes, what are the
equilibrium price and quantity?
22.3.

23. Formulas

23.1. P(t) = P (1 + i) ,
( )
23.2. P=R∙ ,
( )
23.3. F=R∙

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23.4. 𝑦 = 𝑔 ∗ 𝑦 + 𝑓, 𝑒= , 𝑦 = 𝑒 + (𝑦 − 𝑒) ∗ 𝑔

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