Introduction to Linear Models

Introduction

We use mathematics to analyze business situation:

Model: is a mathematical equation, which shows how the variables in the situation are related
A model is very useful in business planning
We will study Linear models relate two variables

Examples

Example 1: A salesmen receives a salary of $5,000 per month. He also receives 3% commission on the sales that he makes.
Question: Write down an equation relating x, the sales he makes in one month (in dollars), and y, his income in one month (in dollars)

Solution: y = 0.03%x + 5000

Example 2: A local shop in the city, Zoho pays a fixed amount of $20,000 per month plus 15% of its total monthly revenue.
Question: Set up a linear model that relates the total monthly rental cost (C) to the total monthly revenue (R).

Solution: C = 0.15R + 20000

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