Table of Contents

SL No Topic Page No

01 Introduction 2-3

02 Applications of Matrix Addition and Subtraction 3-4

03 Applications of Matrix Multiplication 3-4

04 Applications of System of Linear Equations 4-7

05 Closed Input-Output Model 7-8

06 Open Input-Output Model 8-9

07 Conclusion 10

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Introduction
A matrix is a two-dimensional arrangement of numbers in rows and columns enclosed by a pair of square
brackets ([ ]), in the form shown below.

The above figure shows an m × n matrix of m rows and n columns.

Matrices are used to describe linear equations, keep track of the coefficients of linear transformations and to
record data that depend on multiple parameters. They can be added, multiplied, and decomposed in various
ways, which also makes them a key concept in the field of linear algebra.
The subject of matrices has been researched and expanded by the works of many mathematicians, who have
found numerous applications of matrices in various disciplines such as Economics, Engineering, Statistics
and various other sciences.
In this project, the following applications to matrices will be discussed:

❖ Applications of Matrix Addition and Subtraction

❖ Applications of Multiplication of Matrices
❖ Applications of System of Linear Equations
❖ Leontief Input-Output Model

But first, let’s discuss how various situations in business and economics can be represented using matrices.
This can be done using the following examples.

1. Annual productions of two branches selling three types of items may be represented as follows:

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2. Number of staff in the office can be represented as follows:

Applications of Matrix Addition and Subtraction

The applications of addition and subtraction of matrices can be illustrated through the following examples:
Question 01 - The quarterly sales of Jute, Cotton and Yarn for the year 2002 and 2003are given below.

Find the total quarterly sales of Jute, Cotton and Yarn for the two years.
Solution-
The total sales of Jute, Cotton and Yarn will be obtained as under

Question 02 - X Ltd has the following sales position of its products A and B at its two centers P and Q at the
end of the year

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If the sales for the first three months is given as

Find the sales position for the last nine months.

Solution-
Given are the sales positions for the whole year (Y) and for the first three months (Q). Hence, sales position
for the remaining nine months –

Applications of Matrix Multiplication

It is important to note that two matrices can be multiplied if and only if the number of columns of the first
matrix equals the number of rows of the second. The resultant matrix will have the number of rows equal to
the first matrix and number of columns equal to that of the second matrix.
In other words,
➢ A matrix of the order [a x b] can only be multiplied with a matrix of order [b x c]
➢ The resultant matrix will be of the order [a x c]
The application of multiplication of matrices can be illustrated through the following examples.
Question 03 - Ram, Shyam and Mohan purchased biscuits of different brands P, Q and R. Ram purchased
10 packets of P, 7 packets of Q and 3 packets of R. Shyam purchased 4 packets of P, 8 packets of Q and 10
packets of R. Mohan purchased 4 packets of P, 7 packets of Q and 8 packets of R. If brand P costs Rs 4, Q
costs Rs 5 and R costs Rs 6each, then using matrix operation, find the amount of money spent by these
persons individually.

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Solution-
Let Q be the matrix denoting the quantity of each brand of biscuit bought by P, Q and R and let C be the
matrix showing the cost of each brand of biscuit.

Since number of columns of first matrix should be equal to the number of rows of the second matrix for
multiplication to be possible, the above matrices shall be multiplied in the following order.

Amount spent by Ram, Shyam and Mohan is Rs 99, Rs 116 and Rs 99 respectively.
Question 04 - A firm produces three products A, B and C requiring the mix of three materials P, Q and R.
The requirement (per unit) of each product for each material is as follows.

Using matrix notations, find

(i) The total requirement of each material if the firm produces 100 units of each product.
(ii) The per unit cost of production of each product if the per unit cost of materials P, Q and R is Rs 5, Rs 10
and Rs 5 respectively.
(iii) The total cost of production if the firm produces 200 units of each product.
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Solution-
(i) The total requirement of each material if the firm produces 100 units of each product can be calculated
using the matrix multiplication given below.

(ii) Let the per unit cost of materials P, Q and R be represented by the 3×1 matrix as under

With the help of matrix multiplication, the per unit cost of production of each product would be calculated
as under

iii) The total cost of production if the firm produces 200 units of each product would be given as

Hence, the total cost of production will be Rs. 34,000.

Illustration 5 - Mr. X went to a market to purchase 3 kg of sugar, 10 kg of wheat and 1kg of salt. In a shop
near to Mr. X’s residence, these commodities are priced at Rs 20, Rs10 and Rs 8 per kg whereas in the local
market these commodities are priced at Rs 15, Rs8 and Rs 6 per kg respectively. If the cost of traveling to
local market is Rs 25, find the net savings of Mr. X, using matrix multiplication method.

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Solution-
Let matrices Q and P represent quantity and price. Then,

Now, Cost of purchasing from shop = Rs 168 and

Cost of purchasing from local market = Rs 131 + Rs 25 (Cost of travel) = Rs 156
Hence, net savings to Mr. X from purchasing through Local Market
= 168 – 156 = Rs 12
Applications of System of Linear Equations
The Leontief Input-Output Model discusses the interdependence of industries on each other. Based on the
assumption that each industry in the economy has two types of demands: external demand (from outside the
system) and internal demand (demand placed on one industry by another in the same system), the Leontief
model represents the economy as a system of linear equations. The Leontief model was invented in the 30’s
by Professor Wassily Leontief who was awarded the Nobel Prize in Economics in 1973 for his effort.
There are two types of Leontief models, i.e. Closed and Open.
Closed Input-Output Model
Consider an economy consisting of n interdependent industries (or sectors) S1,…,Sn. That means that each
industry consumes some of the goods produced by the other industries, including itself (for example, a
power-generating plant uses some of its own power for production).
We say that such an economy is
closed
if it satisfies its own needs; that is, no goods leave or enter the system. Let mij be the number of units
produced by industry Si and necessary to produce one unit of industry Sj. If pk is the production level of
industry Sk, then mij and pj represents the number of units produced by industry Si and consumed by
industry Sj. Then the total number of units produced by industry Si is given by:

In order to have a balanced economy, the total production of each industry must be equal to its total
consumption. This gives the linear system:

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If

then the above system can be written as AP = P, where

A is called the input-output matrix.

We are then looking for a vector P satisfying AP = P and with non-negative components, at least one of
which is positive.
Open Input-Output Model
The first Leontief model treats the case where no goods leave or enter the economy, but in reality, this does
not happen very often. Usually, a certain economy has to satisfy an outside demand, for example, from
bodies like the government agencies. In this case, let d i be the demand from the ith outside industry, pi, and
mij be as in the closed model above, then

for each i. This gives the following linear system (written in a matrix form):

where P and A are as above and

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is the demand vector.
One way to solve this linear system is

Of course, we require here that the matrix I-A be invertible, which might not be always the case. If, in
addition, (I-A)-1 has nonnegative entries, then the components of the vector P are nonnegative and therefore
they are acceptable as solutions for this model. We say in this case that the matrix A is productive.

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Conclusion
From the analysis we can say that mathematics can be applied in business operation and it helps us to do
business easily and accurately.

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