Introduction

to Business
Mathematics
LINEAR EQUATIONS, FUNCTIONS, DERIVATIVES, AND
MATRICES
Variables

 Dictionary definition : often changing, not

consistent, able to be changed. A
situation, number or quantity that can
vary or be varied
 In mathematics : A symbol (often just a
single letter like “x”) that stands in for an
unknown numerical value in an equation.
 Example : Amount spend, temperature .
Independent &
Dependent Variables
 Independent: controlled
 This may be controlled by the investigator or be
independent.(e.g., Advertising Spend)
 Dependent: outcome
 Depends on the independent variable(e.g., Sales
Revenue)
 Sales = 1000 + 5 × (Ad Spend); y=1000+5x
 Ad Spend is independent, Sales is dependent
Linear and Quadratic
Equations
 General form of an equation: Y=0.
 Examples : 3+2 =5, x+y=0, 10=10
 General form of a linear equation: ax + b = 0
 General form of a linear equation in two variables
: ax +by=c
 General form: ax² + bx + c = 0
 Linear- highest power is one. Quadratic- highest
power is 2.
 A solution to an equation is the value of the
variable which satisfies the equation.
Linear Equations – Basics

 General form: ax + b = 0
 Formula : x= -b/a
 Example: 5x + 10 = 0 → x = -2
 Business Example: Ad spend = Rs 1,00,000 if
Sales= 1000 + 5 × (Ad Spend)
 What are the total sales?
 Equation: 𝑥 = 1000 + 50 × 100000 → 𝑥 = 5001000.
Quadratic Equations –
Basics
 General form: ax² + bx + c = 0
[−𝑏 ± √(𝑏² − 4𝑎𝑐)]
 Formula: 𝑥 = 2𝑎

 Profit function: P(x) = -2x² + 200x - 3000

 Max profit at x = 50 units
Quadratic Equations

 A quadratic equation can have two distinct

solutions.
𝑥 2 −4 = 0,
𝑥 = 2 & 𝑥 = −2
 Two repeated solutions.
𝑥 2 − 2𝑥 + 1 = 0
𝑥=1
 No solution.
𝑥2 + 1 = 0
Linear Equations in Two
variables
 General form: ax + by = c
 A linear equation in two variables represents a
straight line.
 Another common representation :
y=mx +c
m is the slope of the line and c the y intercept(the
point at which the line cuts the y-axis).
How to plot linear
equations on a graph
 Every point in the ℝ2 plane can be written as an
ordered pair 𝑥, 𝑦 , where 𝑥 is the x-
coordinate(abscisa) and 𝑦 denotes the y-
coordinate(ordinate).
 In order to plot a point (𝑥, 𝑦) in the ℝ2 plane, first
mark the number x on the X-axis and then draw a
line parallel to the Y-axis passing through the X-
axis at x.
 Similarly, mark the number y on the Y-axis and
then draw a line parallel to the X-axis passing
through the Y-axis at y.
 The point of intersection of these two lines is the
point 𝑥, 𝑦 .
How to plot linear
equations on a graph
 Linear equation in two variables; 2x+3y=0.
Systems of Linear
Equations
Solving 2x2 systems.
General form : 𝑎1 𝑥 + 𝑏1 𝑦 = 𝑐1
𝑎2 𝑥 + 𝑏2 𝑦 = 𝑐2
where 𝑎1 , 𝑎2 , 𝑏1 , 𝑏2 , 𝑐1 , 𝑐2 are real numbers.

A system of two equations in two variables is said to

have a solution if there exists an ordered pair of real
numbers (𝑥, 𝑦) which satisfy both the equations.
 Unique Solution

 The system is linearly independent.

 Occurs when two lines intersect at exactly point.
 Each equation represents a different line and
both lines have a different slope.

 Example:
 x+y=5
 x-y=1
 No Solution

 The coefficients of one equation are scalar

multiples of the other and the constant term is
different.
 Occurs when lines are parallel and never
intersect.
 Same slope, different intercepts.

 Example:
 x+y=5
 x + y = 10
 Infinite Solutions

 Occurs when both equations represent the same

line.
 The system is consistent and linearly dependent(
the equation of one line is a scalar multiple of the
equation of the other).

 Example:
 x+y=5
 2x + 2y = 10
System of m independent
equations in n variables
 If m=n , then the system has a
unique solution.
 If m<n, then the system has infinitely
many solutions.
 If m > n, then the system has no
solution.
Solving systems of
equations
 Substitution method
 Write one of the equations in terms of one of the
variables and then substitute that variable in the
other equation.
 For the system 𝑎1 𝑥 + 𝑏1 𝑦 = 𝑐1 ……………..(1)
𝑎2 𝑥 + 𝑏2 𝑦 = 𝑐2 ……………….(2)
𝑐1 −𝑏1 𝑦
write 𝑥 = 𝑎1
and substitute in equation (2). This will
give us the value of y.
 The value of y thus obtained can be substituted in
either of the equations to obtain the value of x.
Solving systems of
equations
 Elimination method
 Choose any one of the variables (x or y).
 Multiply both equations by constants such that
the coefficients of x(or y) are equal in both
equations.
For the system : 𝑎1 𝑥 + 𝑏1 𝑦 = 𝑐1
𝑎2 𝑥 + 𝑏2 𝑦 = 𝑐2
𝑎1 𝑎2 𝑥 + 𝑏1 𝑎2 𝑦 = 𝑐1 𝑎2
𝑎1 𝑎2 𝑥 + 𝑎1 𝑏2 𝑦 = 𝑎1 𝑐2
Solving systems of
equations
 Elimination method
 Multiply one of the equations by -1.
𝑎1 𝑎2 𝑥 + 𝑏1 𝑎2 𝑦 = 𝑐1 𝑎2
-𝑎1 𝑎2 𝑥 − 𝑎1 𝑏2 𝑦 = −𝑎1 𝑐2
 Adding both equations we get:
𝑦 𝑏1 𝑎2 − 𝑎1 𝑏2 = 𝑐1 𝑎2 − 𝑎1 𝑐2
𝑐 𝑎 −𝑎 𝑐
𝑦 = 𝑏1𝑎2−𝑎1𝑏2 .
1 2 1 2

 Then substitute the value of 𝑦 in any one of the

equations and obtain 𝑥.
What is a Function?

 A function is a mapping between two sets

called a domain and codomain such that each
element of the domain is mapped to a unique
element of the codamain.
 A function is a relationship between inputs and
outputs.
 Every input (x) has exactly one output (y).
 It is commonly written as: f(x) = some expression
involving x.
 Used widely in business, economics, science, and
technology.
Functions
 The variable y is commonly used to denote f(x). ie
y=f(x).
 y is said to be the image of x and x is said to be
the pre-image of y.
 An element in the codomain need not have a
preimage in the domain.
 For a function f, the set of elements in the
codomain that have a preimage is called the
Range of the function f.
 A function is said to be onto(surjective) if
Range=Codomain.
 A function is said to be one-one(injective) if every
element in the range has a unique pre-image.
Examples of Functions

 Examples:
 1. Revenue Function: R(x) = Price × Quantity
 Example: R(x) = 50x

 2. Cost Function: C(x) = Fixed Cost + Variable Cost

×x
 Example: C(x) = 1000 + 20x
 3. Profit Function: P(x) = R(x) - C(x)
 Example: P(x) = 50x - (1000 + 20x)
Visualizing a Function

 The graph of a function shows how the output

changes with input.
 A linear function like f(x) = 2x + 1 is a straight line.
 A quadratic function like f(x) = x² - 4x + 3 is a
parabola.
 Each x-value has only one y-value — this is what
defines a function.
Linear Functions

 y = f(x)= mx + c.
Exponential Functions

 General Form: 𝑓(𝑥) = 𝑎 𝑥 or 𝑓(𝑥) = 𝑒 𝑥

 'e' is Euler's number ≈ 2.718
 Models population growth, compound interest,
etc.
Logarithmic Functions
 Inverse of exponential functions.
 General Form: 𝑓 𝑥 = log 𝑎 𝑥 or 𝑓(𝑥) = ln(𝑥)
 'ln' is the natural logarithm (log base e)
 Models sound intensity, pH levels, data
compression.
Key Characteristics

 Exponential Functions:
 Domain: All real numbers
 Range: (0, ∞)
 Rapid growth or decay

 Logarithmic Functions:
 Domain: (0, ∞)
 Range: All real numbers
 Slow growth, inverse of exponential
Applications

 These functions are fundamental in modeling

growth and decay in real-world scenarios:
 Exponential functions: Rapid growth or decay
 Logarithmic functions: Slow growth, often used for
scaling
 Both are inverses of each other.
Break-even Analysis

 Break-even analysis determines the

sales volume at which total revenue
equals total cost.
 No profit, no loss at break-even point.
 Helps businesses understand the minimum
output needed to avoid losses.
 Used in pricing, budgeting, and planning
decisions.
Understanding Cost,
Revenue, and Profit
Curves
 These curves help visualize the
financial performance of a business over
varying sales volumes:
 Revenue Curve: Grows with quantity sold.
 Cost Curve: Includes both fixed and
variable costs.
 Profit Curve: Difference between revenue
and cost.
 Useful for identifying break-even and
profit-maximizing output.
Cost-Revenue-Profit
Curves: Subscription
Business
 Example: Online Subscription
Service
 Revenue: ₹300 per subscriber
 Fixed Cost: ₹1,00,000, Variable:
₹50/subscriber
 Profit: 250x − 100000
 Break-even at 400
subscribers
Concept of a Derivative

 A derivative represents the rate of change of

a function.
 A derivative at a point is the slope of the
tangent to the function at that point.
 It measures how a function changes as its input
changes.
 In business, derivatives help analyze marginal
changes such as cost or revenue.
′ 𝑑𝑦 𝑑[𝑓 𝑥 ]
 Notation: 𝑓 𝑥 , , .
𝑑𝑥 𝑑𝑥
Basic Rules of
Differentiation
 Basic Rule:
𝑑
 [𝑥 𝑛 ] = 𝑛 · 𝑥 𝑛−1
𝑑𝑥
𝑑 𝑑 𝑑
 𝑢+𝑣 = u+ 𝑣
𝑑𝑥 𝑑𝑥 𝑑𝑥
𝑑 𝑑 𝑑
 𝑢. 𝑣 = 𝑢 𝑣+𝑣 𝑢
𝑑𝑥 𝑑𝑥 𝑑𝑥
𝑑𝑢 𝑑𝑣
𝑑 𝑢 𝑣 −𝑢
𝑑𝑥 𝑑𝑥
 =
𝑑𝑥 𝑣 𝑣2
Rules of Differentiation:
Exponential & Logarithmic
 Exponential:
𝑑
 𝑒𝑥 = 𝑒𝑥
𝑑𝑥
𝑑
 𝑎 𝑥 = 𝑎 𝑥 · ln(𝑎)
𝑑𝑥

 Logarithmic:
𝑑 1
 ln(𝑥) =
𝑑𝑥 𝑥
𝑑
 log 𝑎 (𝑥) = 1 / (𝑥 · ln(𝑎))
𝑑𝑥
Optimization Using First
Derivative Test
 First Derivative Test:
 The derivative of a function will be 0 at a
maximum or minimum
 Find f'(x) and set it to 0 to locate critical points.
 Analyze sign of f'(x) before and after critical point:
 * If f' changes + to − → local maximum
 Or if f’’ is –ve , f has a local maximum.
 * If f' changes − to + → local minimum
 Or if f’’>0, f has a local minimum.
 * If f' does not change → no extremum
Graph: Optimization with
First Derivative Test
 Function: f(x) = -x² + 10x - 20
 Maximum occurs at x = 5 where f'(x) changes
from positive to negative.
Matrix
 A matrix is a rectangular or square
array of numbers arranged systematically
into rows and columns enclosed in a pair
of brackets.
 A matrix having a single row, is called a
row matrix or row vector.
 A matrix having a single column, is called
a column matrix or column vector.
 If a matrix has 𝑚 rows and 𝑛 columns,
then the matrix is said to have order
𝑚 × 𝑛.
Matrix Addition and
Multiplication
 Addition or subtraction of matrices is defined
only for matrices of the same order.
 The elements of the sum/difference matrix are the
sum/difference of the corresponding elements of
the two matrices.
1 2 −1 0 2 3 1 4 2
 Example : + = .
0 3 0 5 1 4 5 4 4
 A matrix may be multiplied by a scalar number
by multiplying each element of the matrix by that
number.
7 8 35 40
 Example : 5 = .
10 2 50 10
Matrix Multiplication

 Two matrices may be multiplied if and only if the

number of columns in the first matrix is equal to
the number of rows in the second matrix.
 The 𝑖𝑗𝑡ℎ entry of a matrix is the entry in the 𝑖𝑡ℎ row
and 𝑗𝑡ℎ column of the matrix.
 The 𝑖𝑗𝑡ℎ entry of the product matrix is obtained by
multiplying the 𝑖 𝑡ℎ row of the first matrix and the
𝑗𝑡ℎ column of the second matrix.
Inverse of a matrix

 The inverse of a matrix A is another matrix A⁻¹

such that:
 A × A⁻¹ = I (identity matrix)
 The identity matrix is a square matrix whose
diagonal entries are 1 and the rest of the entries
are 0.
 Only square matrices with non-zero determinant
have inverses.
 It's similar to division in matrix algebra.
 Useful for solving systems of linear equations.
Finding the Inverse of a
2x2 Matrix
𝑎 𝑏
 Given matrix A = ,
𝑐 𝑑
 Ensure that |A|= ad − bc ≠ 0
(determinant of A≠ 0).
 The inverse A⁻¹ is given by:
1 𝑑 −𝑏

𝑎𝑑−𝑏𝑐 −𝑐 𝑎
 If determinant is 0, the matrix has
no inverse.
Finding the Inverse of a
3x3 Matrix
 Step 1: Check If the Inverse Exists
 Given a 3×3 matrix A, first compute the
determinant |A|.
 If |A| = 0 → Matrix has no inverse.
 Inverse exists only if determinant is non-zero.
 Step 2: Matrix of Minors
 For each element of the matrix, calculate the
determinant of the 2×2 minor matrix
 - This gives the matrix of minors.
 Example: Minor of element a₁₁ is the determinant
of matrix formed by deleting row 1 and column 1.
Finding the Inverse of a
3x3 Matrix
 Step 3: Cofactors and Adjugate.
 Apply a checkerboard of plus and minus signs to
the matrix of minors → Cofactor matrix
 Alternate signs starting with + in the top-left
 Transpose the cofactor matrix to get the
adjugate matrix (adj(A)).
 Step 4: Compute the Inverse.
1
 𝐴⁻¹ = |𝐴|
× 𝑎𝑑𝑗(𝐴)

 This yields the inverse of the original matrix A

Using Inverse in Linear
Models
 Linear systems can be written as 𝐴𝑋 =
𝐵
 A is the coefficient matrix
 X is the variable matrix (unknowns)
 B is the constants matrix
 Solution: 𝑋 = 𝐴⁻¹ × 𝐵
 Efficient method for solving multiple-
variable systems
Business Example
 The daily cost C of operating a hospital is a linear
function of the number of in-patients I and out-
patients P plus a fixed cost ‘a’, i.e C=a+bP+dI
(a,b,and d are constants). Given the following
data for three days, find the value of a,b and d.

Day Cost(Rs) No. of in No. of out

patients. patients.
1 6950 40 10
2 6725 35 9
3 7100 40 12

a=5000, b=75, d=30

Reference books and
contact information.
 Contact
 Official id : chitra@unigoa.ac.in
 Personal id : chitramekoth@gmail.com

 Reference book : Business Mathematics and

Statistics by B.M. Aggarwal