CHAPTER

2
APPLICATIONS OF MATRICES TO
BUSINESS AND ECONOMICS
OBJECTIVES
After studying the material in this chapter, you should be able to:
Understand and appreciate the various methods of representing large
quantities of data in matrix form.
Use matrix algebra in solving word problems.
" Discuss common methods of solving systems of linear equations that result
from applied business and economics problems.
Understand the concept of Leontief input-output model.

2.1 INTRODUCTION

One of the major methods by which data are tabulated, stored and manipulated makes use of
matrices(Matrices have proved their usefulness in the analysis and decision-making processes
in business, economics, sociology, chemistry-in fact, in any field that has a quantitative side to
iy Another application of matrices deals with the interrelationships that exist between various
sectors of an economy and is known as input-output analysis.
2.2 MATRIX REPRESENTATION OF DATA
(A matrix provides a very convenient and compact notation for representing data in many
business andeconomic situations) This is illustrated with a few examples :
1. Annual production relating to two branches and three types of items may be represented in
the following manner :
Branch Item A Item B Item C
2000 5000 6000|
|3000 4500 7000
2.2 Mathematics for Business Studies
represented i
2. Vitamin content of two types of foods and three types of vitamins may be
the following matrix : Vitamin C
Vitamin B
Food VitaminA
10
4 8

follows :
3. Annual sale of three products in two markets may be represented as
Product Market I Market Il

5000 6000]
B 7000 6000
C 4000 3000

4. Number of staff in the office may be represented by the matrix

Peon
4 Clerk
2 Typist
Head Clerk
Office Superintendent

5. Processing time of three products in two different production departments may be

represented by the matrix
Department
Product
P 3 2|
4
R 1 2

6. The unit cost of transportation of an item from each of the three factories to each of the
four warehouses can be represented by the matrix as follows :
Warehouse
Factory W, W,
[15 17 16 13
20 16 18 12
|16 14 15 20

2.3 MATRIX ADDITION AND SUBTRACTION - APPLICATIONS

The following examples illustrate applications of matrix addition and subtraction.
 Applications of Matrices to Business and Economics 2.3

Example 1.An automobile dealer sells two car models, standard and deluxe. Each is
available in one of two colours, white and red. His sales for the months of January and
February are given by the matrices:
Standard Deluxe
White 2
A = B=
Red 3 4

Eind his total sales for each model and colour for both months.
Solution. The total sales for each model and colour for both months can be obtained by
adding the two matrices A and B:

A+B =

Example 2.The sales figure for two car dealers during January showed that Dealer Asold 5
deluxe, 3premium and 4 standard cars, while Dealer B sold 7 deluxe, 2 premium and 3
standard cars. Total sales over the 2-month period of January-February revealed that Dealer A
sold 8 deluxe, 7 premium and 6 standard cars. In the same 2-month period, Dealer B sold 10
deluxe, 5 premium and 7 standard cars.
Write 2 x 3 matrices summarizing sales data for January and the 2-month period for each
dealer. Hence find the sales in February for each dealer.
Solution . The sales for the month of January can be represented by the matrix
Deluxe Premium Standard
Dealer A 5
A = Dealer B 7 2 3

Each row of Agives the number of each model sold by a given dealer. The sales for the 2
month period can be represented by the matrix
8
B= |10
5

The sales for the month of February is equal to the sales for the 2-month period of January
February minus the sales for the month of January. Thus the sales in February is
7 3 4
B-A =
10 2 3

2.4 SCALAR MULTIPLICATION- AN APPLICATION

The following example illustrates an application of scalar multiplication.
Example 3. In a certain city there are 30 colleges. Each college has 15 peons, 6clerks, 2
cashiers, 1typist and 1section officer. Express the given information as a column matrix.
2.4 Mathematics for Business Studies

Using scalar multiplication, find the total number of posts of each kind in all the colleges.
Solution. The number of posts of each kind in acollege can be represented by the 5 % 1
column matrix:

15
5N 6

A = 2

kind in all the colleges is

Using scalar multiplication, the total number of posts of each
450
180
30A = 30 2 60
30
30

MULTIPLICATION OF MATRICES - APPLICATIONS

2.5
of multiplication of
In the following we give several examples to illustrate applications
matrices.
stones and 10, 5,
Example 4. Three firms A, B and Csupplied 40, 35 and 25 truck loads of
stone and sand are 1200
8 truck loads of sand respectively to a contractor. If the costs of
contractor to each of
and 500 per truck load respectively, find the total amount paid by the
these firms, by using matrix method.
firms 4, B andC
Solution. The amount of stone and sand supplied to a contractor by three
can be represented by the matrix
Stone Sand

A 40 10
X= B 35 5

C|25
The costs (per truck load) of stone and sand can be represented by the colunn matriX
Stone 12001
Y=
Sand 500

Thus the total amount paid by the contractor to each of these firms is given by the matrix
product
 Applications of Matrices to Business and Economics 2.5

[40 101 [53,000] A

XY=35 5 [1200] =44,500| B
500
25 8 |34,000 C
Hence the amount paid to firm 4 $3.000: B- 44.500 andC-34,000.
Lrample 5. Atransport company uses3types of trucks T,, I, and T, to transport 3 types or
vehicles V V; and Vy The capacity of each truck in terms of 3types of vehicles is given
below

1 2
2 3
2 2

Using matrix method, find the number of vehicles of each type which can be transported if
company has 10, 20 and 30 trucks of each type respectively.
[Delhi Univ. B. Com. (H) 1999,2006 (SOL)|
Solution . The capacity of each truck in terms of 3 types of vehicles can be represented by the
matrix

V1 2 3
X = ½3
V,|2 3 2

The number of trucks of each type used by the company can be represented by the column
matrix
T 101
Y = T, 20
7, |30
The total number of vehicles of each type which can be transported is given by the matrix
product
1 2 3||101 [1401
XY =|3 2 2 20 130
|2 3 2[30 [140
Thus the number of 3 types of vehicles V, V, and V, which can be transported are :
V = 140, V; = 130 and V =140
 2.6
Mathematics for Business Studiec
Example . There are two Families A and B.(There are 4 men, 6women and 2 children i
Family Aand(2 men, 2 women, and 4 children in Family B/ The
requirem¿nt for calories is: Man : 2400, Woman : 1900, child : 1800recommended
and for proteinsdailie.y
Man : 55 gram, Woman : 45 gram and Child 33 gram.
Represent the above information by matrices. Using matrix multiplication, calculate the total
requirements of calories and proteins for each of the two families.
Solution. The members of the two families can be represented by the 2 x 3 matrix:
M W C

A4 6
F =
B 2

and the recommended daily requirements of calories and proteins for

each member can be
represented by the 3 x 2 matrix
Calories Proteins
M 2400 551
R= WV 1900 45
C 1800 33
The total requirements of calories and proteins for each
of the two families is given by the
matrix multiplication :

4 6 2 [2400 55]
FR = 1900 45
A 24600 S561
|2 2 1800 B15800 332|
33
Hence Family A requires 24,600 calories and 556 gm
calories and 332 gm proteins. proteins and Family B requires 15,800
EXantple7. The following matrix gives the number of units of three products (P, Q
Vhat can be processed per hour on three machines (4, B and C)
and R)
A B C

P |10 12 151
13 11 20
R |16 18 14|
Determine by using matrix
hours available on machinesalgebra, how many units of each
A, B and C are 54, 46 and 48 product can be produced, if the
respectively.
|Delhi Univ. B.Com. (H) 1992]
Solution. The number of hours available on
3 x 1column matrix : machines A, B and C can be represented by
 Applications of Matrices to Business and Economics 2.7

A| 54]
B46
C 48
Using matrix multiplication, the number of units of each product that can be produced is given oy
|10 12 151Ts4] 1812]
13 11 20 46| =| 2168
|16 18 14| 48| [2364 |
Thus Product P 1812 units, Product O =2168 units and Product R =2364 units.
Bkample 8.Mr. A went to a market to purchase 3 kg of sugar, 10 kg of wheat and 1kg of salt. In
ashop near to Mr. A residence, these commodities are priced at 20, ?
10
whereas in the local market these commodities are priced at 15, 8 and 6 per and
? 8per kg
If cost of travelling to local market is25, find the net kg respectively.
savings of Mr. A using matrix
multiplication. [Delhi Uni. B.Con. (H) 201I]
Solution. The quantity of sugar, wheat and salt purchased by Mr. Acan be represented by the
matrix

Sugar Wheat Salt

Q= A| 3 10 1]
The prices of these commodities in the nearby shop and the local market can be represented
by the matrix
Shop Local Market
Sugar 20 15
P = Wheat 10
Salt 6

The total cost of purchasing at two different places is given by

20 151
QP = 3 10 1]| 10 8 168 131|
8 6

Cost of purchasing from anearby shop= 168

and cost of purchasing from the local market = 131
However, cost of travelling to local market = 25
Net savings of Mr.A = 168 - 131- 25 = 12.

Example 9. A student has 4 places where he can eat lunch. The college canteen charges 8 for
2.8
Mathematics for Business Studies
a Dosa, 3 for French fries and5 for a soft drink. The campus coffee house charges
?10 for aDosa, 2for French Fries and 4.50 for a soft drink. Afast food place charges
{8 for a Dosa, 4 for French fries and 5 for a soft drink. A nearby restaurant serves Dosa
for 12, French fries for 5 and a free soft drink for any order.
Express the above information in a 4 x 3 matrix. The student wishes to buy 1 Dosa, 2 orders
of French fries and a soft drink. Find, using matrix algebra, the cost of lunch at each place
Assuming that the student has no preference for any of the places, decide where he should eat
to spend the least amount of money.
Solution . The information in this problem may be expressed in a 4 x 3 matrix using rows to
represent the eating places and columns to represent the food purchases :
Dosa French fries Soft drink
College canteen 3
Coffee house 10 2 450
Fast food place 4
Restaurant 12 5
His order can be represented by the column matrix
Dosa
French fries |2
Soft drink
Using matrix multiplication, the cost of lunch at each place can be
determined as follows :
8 3 R19 College canteen
10 4.50
2 18.50 Coffee house
8 4 721 Fast food place
|12 5 R22 Restaurant
Hence the student would spend the least amount of
money by eating at
EAample 10. Afirm produces three products A, Band C which it campus coffee house.
Annual sales in units are given as follows : sells in two markets.
Marker
Units Sold
A B C
8000 4000 16,000
II 7000 18,000 9000
If the prices per unit of 4, B and C are ?
per unit are 1.70, 1.20 and 0.80 2.50, * 1.25 and ? 1.50respectively and the costs
using matrix algebra.
respectively, find the total profit in each market by
(Delhi Univ. B. Com. (H) 1990)
Applications of Matrices to Business and Economics
2.9

Solution . The profits per unit of 4. Band C can be obtained as follows :

[2.50] i.701 T0.801

1.25 1.20 -0.05
|1.50 0.80 |0.70
The total profit in each market is given by the
matrix product
f8000 4000 16, 000 [0.801 [17,8001
0.05
|7000 18,000 9000 [12, 800
L0.70
Thus th¹ profit in Market I is 17,800 and the profit in Market II is 12,800.
Exhple 11 .A manufacturer produces three products X, Yand Z which he sells in three
párkets I, II and III. Monthly sales and sale prices are given as
follows :
Market Items Sold Sale Price (in )
X X
1000 1s00 2000 2.00 3.00 4.00
II 2000 2800 3000 2.50 2.80 3.70
III 3000 3500 4000 2.30 3.10 4.20
If the costs per item for three products X, Yand Z are 1.80, 2.50 and 3.40 respectively,
find by matrix algebra his total profit. |Delhi Univ. B.Com. (H) 2006]
Solution. The total profit is given by

2.00 - 1.80| [2.50 - 1.801

[1000 1500 2000]|3.00 - 2.50+ (2000 2800 3000]|2.80 2.50+
4.00- 3.40 3.70 - 3.40
2.30 - 1.801
|3000 3500 4000||3.10 -2.50
|4.20 - 3.40 |

f0.201 fo.70] [o.s01

= [1000 1S00 2000]| 0.50 +[2000 2800 3000]|| 0.30+[3000 3500 4000]| 0.60
|0.60 |0.30 |0.80
- (2150] +[3140] + [6800]=[12,090]1.
Thus the total profit of the manufacturer is 12,090.
 2.10 Mathematics for Business Studier
Eymple 12.In a certain city there are 50 colleges and 400 schools. Each school and college
1
has 18 peons, 5 clerks and Icashier. Each college, in addition, has Isection officer and
librarian. The monthly salary of each of them is as follows :
Peon-300, Clerk-7500, Cashier- 600, Section Officer- 700 and Librarian- 900
Using matrix notation, find (i) total number of posts of each kind in schools and colleges
taken together, (ii) the total monthly salary bill of all the schools and colleges taken together
|DelhiUni. B. Com. (H) 1983)
Solution . The number of schools and colleges can be represented by the matrix
School College
A =400 50 |
The number of posts of each kind in each school and college can be represented by the matrix
Peon Clerk Cashier S.offcer Librarian
School 18 5 1
B = 1
College 18 1

() The total number of posts of each kind in schools and colleges taken together can be
obtained by the matrix product
Peon Clerk Cashier S.oficer Librarian
School College f18 5 0 0 1School
[400 50 18 1 1 1 JCollege

Peon Clerk Cashier S.officer Librarian

=|8100 2250 450 S0 50
Thus there are 8100 peons, 2250 clerks, 450 cashiers, 50 section officers and 50 librarians in
all schools and colleges taken together.
(i) The total monthly salary bill of all the schools and colleges taken together is given by
[300
500
[8100 2250 450 50 s0] 600 = [39, 05, 000]
700

900
Hence total monthly salary bill = 7 39,05,000.
13. Afirm produces three products P, P, and P, requiring the mix-up of three
materials M,M, and M, The per unit requirement of each product for each material is as
follows :
 2.11
Applications of Matrices to Business and Economics

M, M, M,
3 1
Pi
A P; 4 2

P3 2 4 2
Using matrix notations, find
(0 The total requirement of each material if the fim produces 100 units of each product.
(i) The per unit cost of production of each product if the per unit costs of materials M M2
and M, are 5, ? 10 and 5 respectively, and
(iii) The total cost of production if the firm produces 200 units of each product.
[Delhi Univ. B.Com. (H) 1998]
Solution. () The total requirement of each material if the firm produces 100 units of each
product is given by the matrix product

P
M1 [2 4 M 800
M2 3 2 4 100| P =M, 900
M, 2100 M; 800
Thus the firm requires 800 units of material M, ,900 units of material M, and 800 units of
material M, to produce 100 units of each product.
(üi) The per unit cost of production of each product is given by the matrix product

M M2 M3
[2 3 11T51M, P[45]
P 4 2 S|| 10| M, = ,65
P|2 4 2] 5M, B\60
Thus the per unit costs of three producs P, P, andP, are ? 45,7 65 and 60 respectively.
(i) The total cost of production if the firmproduces 200 units of each product is given by
[451
(200 200 200]|65 = (34,000])
60
Thus the total cost of production is 34,000.
Eyafiple 14. The following matrix gives the proportionate mix of constituents used for the
three fertilizers:
Thus the total cost per week is 7565.
Example 15. The manager of acar rental company is planning its maintenance programme
for the next year and wants to determine the needs for certain repair parts and the expected
costs. The company rents out three types of cars: large, medium and small. The matrix N
gives the number of each size of cars available for renting in the four regions.

Region
I II III
160 150 100 120 Large
N =400 300 100 400 Medium
500 200 150 300 Small
Because of cost and frequency of replacement, the manager is concentrating on four repair
parts in particular : fan belts, spark plugs, batteries and tyres. On the basis of past records, the
average number of repair parts needed per car during a year are given in matrix R. Further, the
matrix C gives the cost (in ) per unit for the four parts.
1,7 1.6 1.5 Fan belts
12.0 8.0 5.0| Spark Plugs
R=
0.9 0.75 0.5| Batteries
C=(125 80 300 350]
4.0 6.5 6.0 Tyres
Using matrix operations, find
() the total demand for each type of car,
(i) totaldemand for each repair part needed for the fleet, and
(üi) total combined cost for all repair parts. [Delhi Univ. B.Comn. (H) 2000)
2.14 Mathematics for Business Studies
Solution. () Total demand for each type of car is :

160 150 100 120 530

400 300 100 400 1200
500 200 150 300 |1150

Thus the total demand for each type of car is: Large - 530, Medium - 1200 and Small- 1150
(ii) Total demand for each repair part is :

1.7 1.6 1.5] 4546

530
12 8 21,710
1200
0.9 0.75 0.5 1952
1150
4 6.5 6.0| 16,820|
Thus the total demand for each repair part is as follows:
Fan belts - 4546, Spark plugs - 21,710, Batteries 1952, Tyres - 16,820.
(iii) Total combined cost for all repair parts is :

4546 1
21,710
125 80 300 350) - (87,7,650]
1952
|16,820
Thus the combined cost for all repair parts is 87,77,650.