a) The consumption function is given as follows: C=
; where consumption (C) and income (Y) are both measured in
i. Sketch the consumption function.
ii. Interpret the numbers “0.7” and “5” in the function.
b) The quantity demanded per month of thumb-drives manufactured by
Phoenix Industries, is related to the price of thumb-drives. The
demand equation is
p= -0.00042x +6
where 0 is less or equal to X and X is less or equal to 12000
Where p denotes the unit price in ringgit and x is the number of
The total monthly cost (in ringgit) for producing x copies of
thumb-drives is given by
C(x) = 600 + 2x – 0.00002x^2 where 0 is less or equal to X and X is
less or equal to 20000
i. State the profit function. Sketch the function. Ensure that you
specify the x- and y-intercepts, and the vertex.
ii. How many copies should Phoenix produce per month in order to
maximize its profits?
iii. What is the price that should be charged?