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Mathematical Applications
in Business Case
1
A Report on Applying Mathematical Applications in Business Case
Prepared for:
Mahabuba Lima
Assistant Professor
Department of Finance
University of Dhaka
Prepared by:
Group No. 9
Section - c
BBA 24th Batch
Department of Finance
Faculty of business studies
University of Dhaka
2
Group Profile
Group Number: 09
Section: C
BBA 24th Batch
Department of Finance
University of Dhaka
3
Letter of Transmittal
Mahabuba Lima
Assistant Professor
Department of Finance
University of Dhaka
Here is the report of the study on “Applying mathematical application in business Case” in the
perspective of different organizations.
We would like to say that this report was helpful for us to know about the ways of using the
mathematical applications in our real life practically. We are very thankful to you for giving us such a
wonderful opportunity of widening our knowledge from the pages of our book to the field of practice.
You will be happy to know that, we have tried our best to make this report more & more informative and
factual.
Sincerely Yours,
……………………
Sajib Hossain
ID No: 23-181
On behalf of group: 09
BBA 24th batch
Department of Finance
University of Dhaka
4
Table of Contents
Executive Summary ……………………………………………………………………………………………………………………………… iv
Table of Contents………………………………………………………………………………………………………………………………… …v
Introduction ................................................................................................................................................. 7
Chapter 01 ................................................................................................................................................... 8
Set theory………………………………………………………………………………….……………… ……………………………………………8
Origin of the report ………………………………………………….……………………………………………………………………… 8
Methodology………………………………………………………………………………………………………………………………………...8.
key parts of the report……………………………………………………….……………………………………………….………8
Objective of the report…………………………………………………………………………………………………………….…8
Case study of set theory ............................................................................................................................. 10
Conclusion…………………………….………………………………………………………………………………………………….12
Chapter 02 .................................................................................................................................................. 13
Coordinate geometry .................................................................................................................................. 13
Case study of coordinate geometry………….……………………………………………………………………………………………16
Chapter 03……………………………………………………………………….……………………………………………………………………17
Linear equation……………………………………………………..………………………………………………………………………………17
Case study of linear equation…………………………………………………………………………………………………………………19
Chapter 04.................................................................................................................................................. .20
Break even analysis …….………………………………………………………………………….…20
Case study of break-even analysis……….……………………………………………………………23
Chapter 05…………………………………………………………………………………………………23
Matrix Algebra……………………………………………………………………………………24
Case study of matrix Algebra……………………………………………………………...…......26
Conclusions……………………………………………………………………………………….27
Conclusion………………………………………………………………………………………………...27
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Executive Summary
The purpose of set theory is not practical application in the same way that, for example, Fourier
analysis has practical applications. To most mathematicians (i.e. those who are not themselves
set theorists), the value of set theory is not in any particular theorem but in the language it gives
us. Nowadays even computer scientists describe their basic concept - Turing machines - in the
language of set theory. This is useful because when you specify an object set-theoretically there
is no question what you are talking about and you can unambiguously answer any questions you
might have about it. Without precise definitions it is very difficult to do any serious mathematics.
The coordinate geometry is an important branch of mathematics. It mainly helps us to locate the
points in a plane. Its uses are spread in all fields like trigonometry, calculus, dimensional
geometry etc. And the subject has obvious applications in statistics, physics also. In real life for
the construction field we are mainly using the coordinate geometry. The sketch of the building is
pure geometry and for printing pdf files we are using this geometry help. For finding the distance
between the places we are using coordinate geometry and in geography also it have many
applications. In astrophysics to find the distance between the planets, coordinate geometry helps.
One of the realities of life is how so much of the world runs by mathematical rules. As one of the
tools of mathematics, linear systems have multiple uses in the real world. Life is full of situations
when the output of a system doubles if the input doubles, and the output cuts in half if the input
does the same. That's what a linear system is, and any linear system can be described with a
linear equation.
The break-even point has its origins in the economic concept of the "point of indifference." From
an economic perspective, this point indicates the quantity of some good at which the decision
maker would be indifferent, i.e., would be satisfied, without reason to celebrate or to opine. At
this quantity, the costs and benefits are precisely balanced
.
In mathematics, a matrix (plural matrices) is a rectangular table of elements (or entries), which
may be numbers or, more generally, any abstract quantities that can be added and multiplied.
Matrices are used to describe linear equations, keep track of the coefficients of linear
transformations and to record data that depend on two parameters. Matrices can be added,
multiplied, and decomposed in various ways, making them a key concept in linear algebra and
matrix theor
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Introduction
Methodology
The methodology of this report is collective. The report is based on collected information from our
course study and internet. That means, we depended heavily on secondary information.
Key parts of the report
The main view of the report is to know the use of mathematical applications in our real life.
Primary objective:
The primary objective of the report is the completion of our course F-104.
Gather knowledge about the use of mathematical applications and learning the ways of applying them
in our real life.
Scope of the report
The present study is an attempt to know the practical use of the mathematical applications in our real
life-
Learning the process and ways of using mathematical applications
Ways of applying them in our real life.
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Chapter: 01
Set Theory
Definition
A set is a collection of well-defined and well distinguished objects. From a set it is possible to tell
whether a given object belongs to a set or not.
The basic characteristic of set is that it should be well defined. Its objects and elements should be well
distinguished for easy recognition by description.
Elements of Sets
The objects that make up a set are called the elements of sets. We use the Greek letter capital epsilon €
to indicate that a particular element belongs to a set.
Operations of Sets
The operations of sets are intersection ∩, union and complementation. They are described below:
Intersection of Sets
The intersection of sets A and B is the sets consisting of all elements which belong to both A and B. The
intersection of sets is denoted as A∩B.
A∩B
The union of two sets A and B is the set consisting all elements which belong to either A or B or both.
The union of A and B is denoted as A∪B.
Complement of a Set
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The Complement of a Set is the set which consists all those elements which do not belong to that set. If
U be the universal set and A be any set then complement of A set is the set U-A and is denoted as A' or
~A.
Formulas
i) n(A∪B) = n(A)+n(B)-n(A∩B)
ii) n(A∪B∪C) = n(A)+n(B)+n(C)-n(A∩B)-n(B∩C) n(A∩C)+n(A∩B∩C)
Use of Sets
The purpose of sets is to house a collection of related objects. They are important everywhere in
mathematics because every field of mathematics uses or refers to sets in some way. They are important
for building more complex mathematical structure. The use of sets are described below:
They allow us to treat a collection of mathematical objects as a mathematical object on its own right.
1. For dealing with finite collections of objects we can somehow wiggle around sets.
2. Sets allow us to develop mathematical theories formally, by having the collections we want to talk
about as mathematical objects on their own accord
3. Writing bisection between the rational numbers and the integers is very unintuitive without the basic
development of sets and set theory.
Venn Diagram
A Venn diagram or set diagram is a diagram that shows all possible logical relations between finite
collections of different sets. Venn diagrams were conceived around 1880 by John Venn. They are used to
teach elementary set theory, as well as illustrate simple set relationships in probability, logic, statistics,
and linguistics and computer science.
Venn diagram
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The use of set in our practical life is too many to describe. We use set for many purposes specially for
making decisions from some given data.
Example: 01
A factory inspector inspected on 100 products about defectiveness of longevity, plainness and size and
provided the following report. 5 products have three defects, 10 have defects on longevity and
plainness, 8 on size and plainness, 20 on size and longevity, 30 on plainness only, 23 on longevity only,
and 50 on size only. The inspector is fined for this report, why?
Let, U= the set of the product that inspected by the inspector
A= the set of the product that have defect on longevity
B= the set of the product that have defect on plainness
C = the set of the product that have defect on Size
Requirement: To verify (U) = 100
Given, n (U) =100, n (A) =? N (B)=?, n(C)=?, n(A ∩ B) =10, n( B ∩ C )=8, n( A ∩ C)=20, n ( A ∩ b ∩ C )= 5, n
(A' ∩B ∩ C' )=30, n (A ∩ B' ∩C' )=23, n(A' ∩ B' ∩ C )= 50
So, n (A ∩ B' ∩C’) =n (A) - n(A ∩ B)- n(A ∩ C) + n(A ∩ B ∩ C)
23 = n (A) -10-20+5
23+10-5=n (A)
So, n (A) =48
n (A' ∩B ∩ C' )= n(B) - n(A ∩ B) - n(B ∩ C) + n(A ∩ B ∩ C)
30 = n(B)-10-8+5
30+10+8-5= n(B)
So, n(B) = 43
Again, n(A' ∩ B' ∩ C )= n(C) - n(A ∩ C) - n(B ∩ C) - n(A ∩ C) + n(A ∩ B ∩ C)
50= n(C) -20-8+5
50+20+8-5=n(C)
So, n(C) = 73
We known that,
n(A ∪ B ∪ C) = n(A) + n(B) + n(C) - n(A ∩ B) - n(B ∩ C) - n(A ∩ C) + n(A ∩ B ∩ C)
=48+43+73-10-8-20+5
=169-38
=131
So, If the report shows (A ∪ B ∪ C) =100 there will be no errors but n(A ∪ B ∪ C) =131.
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Example: 02: In a survey concerning tooth paste preferences of consumers it was found that 60%
use close up and 40% pepsodent , 35% white plus , 20% close up and pepsodent , 15% pepsodent and
white plus , 16% White plus and Close up , and 8% all the above three brands.
Among the above mentioned tooth paste, find the consumer
(I)Use at least one tooth paste, (II)Use none.
Let, U= the set of all customers,
A= the set of the customers who use close up
B= the set of customer who use pepsodent
C= the set of customer who use White plus
Suppose, n (U) = 100,
n (A)= 100*60%=60
n(B)=100*40%=40
n(C)=100*35%=35
n (A ∩ B) =100*20%=20
n (B ∩ C) =100*15%=15
n (A ∩ C) =100*16%=16
n (A ∩ B ∩ C) =100*8%=8
Requirement:
(I) n (A ∪ B ∪ C) =?
(II) n (A ∪ B ∪ C) ' =?
n (A ∪ B ∪ C) = n(A) + n(B) + n(C) - n (A ∩ B) - n (B ∩ C) - n (A ∩ C) + n(A ∩ B ∩ C)
=60+40+35-20-15-16+8=92
So, 92% customer uses at least one brand tooth paste.
(III) n(n(A ∪ B ∪ C) '=n(U)-n(A B ∪ C)
=100-92=8
So, 8% consumer uses none of three brand tooth paste.
1.11 Conclusion
Set theory helps us taking important decisions from a given data. We used set theory for taking decision
about our production of tea. We can use it in other decisions of our life. This will reduce the uncertainty
of our decisions and make our decisions more effective.
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Chapter: 02
Coordinate Geometry
Definition
The coordinate plane or Cartesian plane is a basic concept for coordinate geometry. It describes a two-
dimensional plane in terms of two perpendicular axes: x and y. The x-axis indicates the horizontal
direction while the y-axis indicates the vertical direction of the plane. In the coordinate plane, points are
indicated by their positions along the x and y-axes.
We can locate a point in the coordinate system with an ordered pair. An ordered pair is made of two
numbers: the reading of the two axes. We put the x reading first, then the y, like this: (x, y). The
coordinate plane is divided into four parts: the first quadrant (quadrant I), the second quadrant
(quadrant II), the third quadrant (quadrant III) and the fourth quadrant (quadrant IV). The position of the
four quadrants can be found on the figure on the right. A point can lie on any of these quadrants, the x-
axis, the y-axis or the origin. We can find out some basic properties of the ordered pair just by looking at
the position of the point.
Quadrant I: (x, y)
Quadrant II: (-y, y)
Quadrant III: (-x, -y)
Quadrant IV: (x, -y)
The x-axis: (x or -x, 0)
The y-axis: (0, y or -y)
The origin: (1, 1)
The coordinate plane at the right, point L is represented by the coordinates (–3, 1.5) because it is
positioned on –3 along the x-axis and on 1.5 along the y-axis. Similarly the positions are for the points M
and N is (2, 1.5) and (–2, –3) respectively.
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angled triangle with AB as the hypotenuse. The length of AC = 3 – 1 = 2. The length of BC = 4 – 1 = 3.
Applying Pythagorean Theorem
AB2 = 22 + 32
AB2 = 13
AB =
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Case Study of Linear Equation
The owner of TEA ZONE needs the area of the room where he runs his business because he wants to
buy a new carpet for that room which will be the same size of the room’s area which is rectangular in
shape. The points of the each corner of the room are (-4,2) ; (3,-5) ; (6,-2) and (1,7).
Now, we have to find out the area of that particular room.
Solution
Let the four corners of that room are,
A = (-4,2)
B = (3,-5)
C = (6,-2)
D = (1,7)
So, the size of the carpet that will be used by TEA ZONE is 56 square units.
The coordinate geometry is an important branch of mathematics. It mainly helps us to locate the points
in a plane. The main contribution of coordinate geometry is that it has enabled the integration of
algebra and geometry. In real life for the construction field we are mainly using the coordinate
geometry. The sketch of the building is pure geometry. For finding the distance between the places we
are using coordinate geometry.
Case study: Forge Company has 3 factories in New York city. From two perpendicular roads, let’s say
them road X and Y, factory EG1 is at a distance of 100 yards and 300 yards respectively. Factory EG2 has
a distance of 250 and 500 yards respectively. And factory EG3 is at a distance of 400 and 250 yards
respectively. Find the distance between factory EG1 and EG2.
Solution
Let us take factory EG1 as A and factory EG2 as B.
Let the points
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A (x1, y1) = (100, 300)
B (x2, y2) = (250, 500)
Now we have to find out AB =?
(AB means the distance between A and B)
We know,
AB =
=
=
=
=
=250
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Chapter: 03
Linear Equation
Definition
A linear equation in two variables describes a relationship in which the value of one of the variables
depends on the value of the other variable. In a linear equation in x and y, x is called x is the
independent variable and y depends on it. We call y the dependent variable.
Example: y = 2x + 1 is a linear equation:
The
graph of y = 2x+1 is a straight line
When x increases, y increases twice as fast, hence 2x
When x is 0, y is already 1. Hence +1 is also needed
So: y = 2x + 1
Different Forms
There are many ways of writing linear equations, but they usually
have constants (like "2" or "c") and must have simple variables (like "x"
or "y").
To find the rate at which y is changing with respect to the change in x, write your results as a ratio: (y2 –
y1)/(x2 – x1).
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Horizontal Line: When there is no change in y as x changes, the graph of the line is horizontal. A
horizontal line has a slope of zero.
Vertical Line: When there is no change in x as y changes, the graph of the line is vertical. A vertical line
has an undefined slope.
Calculating cost of operating a computer in a cyber café that service is provided by TEA ZONE by using
Linear Equation:
Example 01: If one seats in a cyber café for operating computer, he has to pay 0.75tk and 1.25 tk for per
hour operating. Let y represent the cost and x the number of d hours operated. Write the equation for y
in terms of x. Find the cost if 22 hours operated.
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Piecewise linear functions: A piecewise linear function is a function composed of some number of
linear segments defined over an equal number of intervals, usually of equal size.
This is piecewise linear with four pieces. Since the graph of a linear
function is a line, the graph of a piecewise linear function consists of line
segments and rays. The graph of this function will be like that:
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Chapter: 04
Break Even Analysis
Definition
Break Even Analysis means determining the place where the Profit equals to Zero. That means, finding
the point where Revenue and Cost are same is called Break Even Analysis.
In broader sense, Break Even Analysis is the analysis to determine the point at which revenue received
equals the costs associated with receiving the revenue.
Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed
the break-even point. This is the amount that revenues can fall while still staying above the break-even
point.
Break-even analysis is widely used to determine the number of units the business needs to sell in order
to avoid losses. This calculation requires the business to determine selling price, variable costs and fixed
costs. Once these numbers are determined, it is fairly easy to calculate break-even point in units or sales
value.
Break Even Analysis is a simple and valuable forecasting technique. Business can use Break Even Analysis
to:
The following limitations of break-even analysis have to be kept in mind while making use of this tool:
Many costs and their components do not fall into neatly compartmentalized fixed or variable
cost categories as they possess the characteristics of both types.
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If company sells several products, the financial manager has to prepare and evaluate a number
of profit-graphs covering integrated segments of independent activities.
A break-even chart represents a short-run static relationship of costs and output and become
obsolete very quickly.
The frequent changes happening in the selling price of the product affect the reliability of the break
even analysis.
Fixed Costs: These costs stay the same regardless of how many units the company is producing. These
include start-up costs, and other capital expenses which do not have to be paid periodically. Rent,
insurance, utility bills and repairs are also considered fixed costs, since variations are minute and the
amount does not directly depend on the number of items produced. For example, if a tire manufacturer
rents a building at $2000 per month, and decides to produce 100 tires, the fixed cost will be $2000. The
amount will stay the same if even there is no activity and zero tires are produced.
Variable Costs: These costs are directly associated with the number of units produced, and these are
recurring in nature, since they have to be paid periodically. As the business produces more and more
goods and services, these costs increase proportional. For example, the cost of rubber required to
manufacture a tire is $10. If company produces zero tires, the total variable cost comes down to $0
(10*0). On the other hand, if the company produces 500 tires, the total variable cost comes down to
$5000 (500*10). These costs usually include material, labor, direct sales and promotion, storage etc.
Break-Even Chart
Break-Even charts are being used in recent years by the managerial economists, company executives
and government agencies in order to find out the break-even point. In the break-even charts, the
concepts like total fixed cost, total variable cost, and the total cost and total revenue are shown
separately. The break even chart shows the extent of profit or loss to the firm at different levels
of activity. The following Figure illustrates the typical break-even chart.
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In this diagram output is shown on the horizontal axis and costs and revenue on vertical axis. Total
revenue (TR) curve is shown as linear, as it is assumed that the price is constant, irrespective of the
output. This assumption is appropriate only if the firm is operating under perfectly competitive
conditions. Linearity of the total cost (TC) curve results from the assumption of constant variable cost.
It should also be noted that the TR curve is drawn as a straight line through the origin (i.e., every unit of
the output contributes a constant amount to total revenue), while the TC curve is a straight line
originating from the vertical axis because total cost comprises constant / fixed cost plus variable cost
which rise linearly. In the figure, В is the break-even point at OQ level of output.
Solution:
From the case, we came to know that
Fixed cost = $18,000
Variable cost = $9
Selling price = $15
We denote the number of sunglasses made and sold by q. Since sunglasses are sold at $15 per piece, the
revenue function is
R(q) = 15q
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Now, since the variable cost per sunglass is $9, the variable cost of making q amount of sunglasses will
be 9q. Adding the fixed cost of $20,000 the cost function becomes
C(q) = 9q + 18,000
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Chapter: 05
Matrix Mathematics for Business
Introduction
In mathematics, a matrix (plural matrices) is a rectangular array of numbers, symbols, or expressions,
arranged in rows and columns—that is treated in certain prescribed ways. The individual items in a
matrix are called its elements or entries. The general form of a matrix with m rows and n columns is:
Case Study: Max Company is a new pen manufacturer company. The owner of the company wants to
produce gel pen and sign pen in this company and has started to produce. The company uses same
types of materials to produce gel pen and sign pen. In this month the company has continued it’s
production during 1st 2 weeks. The
company has used 9 units x material and 18 units labor for producing gel pen in the 1st week. It has
also used 6 units material and 30 units labor for producing sign pen in the 1st week. The costs of per unit
material and labor are respectively x and y.
In the 1st week, the company has produced 200 units gel pen and 250 units sign pen. And in the 2nd
week it has produced gel pen and sign pen respectively 150 units and 200 units. In the 1st week, the
total costs of producing gel pen and sign pen are respectively 640 and 840. During the month, the
company has sold gel pen and sign pen respectively 300 units and 350 units.
1. What is the total production of gel pen and sign pen of the month?
2. What is the stock at the end of the month?
3. What is the cost of per unit material and labor?
= 200+150 250+200
= 350 450 )
1. The stock at the end of the month = ( 350 450 - 300 350 )
= (350-300 450-350 )
= (50 -100)
The per unit material cost = x
The per unit labor cost = y
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(Solution by using Cramer’s Rule)
9x + 18y = 640
6x + 30y = 820
9 18 x = 640
6 30 y 820
Let, A = 9 18
6 30
|A| = 9 18
6 30
= (9x30 - 6x18)
= 270 - 108
= 162
Nx = 640 18
820 30
= (640x30 820x18)
= 19200 - 14670
= 4440
Ny = 9 640
6 820
= (820x9 – 640x6)
= 7380 - 3840
= 3540
X =
= 27.41
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Y
= 21.85
Conclusion:
Matrix is a powerful tool of modern mathematics having wide applications. Sociologists use matrices to
study the dominance within a group. Demographers use matrices in the study of births and survivals,
marriage, class structure and mobility etc. Matrices are all the useful for practical and business purposes
and therefore, occupy an important place in business. Matrix is simple, general and flexible method of
mathematical problem solving.
Mr. Robin bought copier a on July1, 2006 cost Tk.120000 by borrowing the amount from a financial
company. Here we have used logarithm for calculating the interest. The logarithm of a number to a given
base is the index or the power to which the base must be raised to produce the number. So, this loan will
be paid after 5 years. Interest rate for this loan is 10% and interest will be compounded quarterly but
interest will be paid yearly Interest Calculation on Dec 31, 2010HerePrincipal, P = Tk. 12000. Interest
Rate (i) = 10%=0.1. Years = 5. Number of time interest compounded within a year, m = 4
Example: 01: Matador Company ltd. Company operates in Dhaka, Bangladesh.. It usually produces and
sells ball pens, stapler etc. Now the production manger is wanted to determine the cost of per unit of a
product from the following information. A product is produced by using 3 units of labor and 2 units of
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capital. The total cost comes to 62. If the commodity is produced by using 4 units of labor and 1 unit of
capital, the cost comes to 56. What is the cost per unit of labor and capital?
Let, the cost per unit capital =x and per unit labor =y
According to the 1st condition 2x+3y=62…………..(i)
According to 2nd condition x+4y =56 ………………(ii)
Putting the value of x in (i)
2(56-4y)+3y=62
112-8y+3y=62
-5y=62-112
Y=
So, y=10
Putting the value of y in (ii)
X=56-4*10
X=56-40
So, x=16
Hence the cost of per unit labor is tk.10 and capital is tk.16.
Example 02:
You are manufacturing a new MP3 music player such as the Apple iPod. The manufacturer advertises the
number of music tracks that can be stored in the memory. Usually, the advertisers assume relatively short,
popular music to estimate the number of tracks that can be stored. You, however, like Broadway musical
tunes and they are much longer. You would estimate demand for your music player is established by the
equation PQ=100 when p is the price and q is the quantity and supply is given by the equation 20+3p=q.
You wanted to estimate the equilibrium price and quantity.
Here, PQ =100
q=
We know at equilibrium,
D=S
So, 20+3p=
20p+3p2=100
3p2+30p-10p-100=0
3p(p+10)-10(p+10)=0
(p+10)-(3p-10)=0
p=-10 or, 3p=10
Here, price cannot be negative so, p=
26
So, the equilibrium price is and the supply is 30 units.
Conclusions
Applications of mathematics in business give a new to calculating business factors easily. The
mathematics concepts help business owner to make short term and long term planning and make
decisions. We can get an overall view of future time in business. Mathematics functions and formulas
save our time and make us more efficient and effective.
By preparing this report about mathematics applications, we have learnt a lot and broaden our outlook
about the applications of mathematics.
We all want express our gratitude to our course teacher for all kinds of help and stay beside in our
problems. It has become a great team work and helps all of us to gain the knowledge about the
applications of mathematics in business.
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