CHAPTER MModeling a odeling a BBusinessusiness · 2-1 Interpret Scatterplots ... 2-3 Supply and...

If you do an Internet search for the word model, you will fi nd it used

in a variety of contexts. There are computer models, medical models, working models, scientifi c models, business models, data models, and more. In each of these cases, a model is a representation. It is a well-formulated plan that can be used to represent a situation. Often, the model is a simplifi ed version of the actual scenario. In this chapter, you will learn how to use mathematics to model a new busi-ness venture. You will use variables and examine relationships among those variables as you explore the business concepts of expense, revenue, and profi t. Statistics play an important role in the creation and use of a business model. You will represent real-world situations with equations, analyze the data that has been derived from those equations, use data to make predictions, and generate and interpret graphs in order to maximize profi t. As you work through this chapter, you will realize the importance of Henry Luce’s words. The models you explore will examine the future success or failure of a product and will help you make decisions that will mold and shape its future.

CHAPTER

Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight.

Henry R. Luce, Publisher and

Philanthropist

Modeling a Modeling a BusinessBusiness

2-1 Interpret Scatterplots

2-2 Linear Regression

2-3 Supply and Demand

2-4 Fixed and Variable Expenses

2-5 Graphs of Expense and Revenue Functions

2-6 Breakeven Analysis

2-7 The Profi t Equation

2-8 Mathematically Modeling a Business

2

for the wordin a variety of contexts There are com

What do you think

Henry Luce meant in this quote?

What do you think? Answers should contain a

reference to the fact that in

business, it is important to

look ahead, to predict, and

to calculate and weigh all

options when making

decisions.

TEACHING RESOURCESInstructor’s Resource CD

ExamView ® CD, Ch. 2

eHomework, Ch. 2

www.cengage.com/school/math/fi nancialalgebra

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Really!

Really?

Think of all the successful brand name products you use on a daily basis. Imagine all of the brain power and creative energy that went into inventing, perfecting, advertising, and selling these items. With all the resources major corporations have to make sure a product will sell, can you ever imagine a successful corporation producing a product that is a failure?

The business world is full of products that have failed. Some of the failures are from very well-known companies, such as The Coca-Cola Company, Ford Motor Company, and Sony Corporation of America. Below are three famous failures.

New Coke• In April 1985, The Coca-Cola Company changed the recipe of Coca-Cola, and the public was outraged. By July 1985, the company decided to bring back the original formula for Coca-Cola.

Edsel• The Ford Motor Company unveiled its new 1958 Edsel in the fall of 1957. The car had a radically different look and was often described as ugly. The buying public did not like the sound of the name, and the advertising campaign had fl aws. By 1959, production ceased on the Edsel, and the term is still used as a synonym for a failed design.

Sony Betamax• In the late 1970s, Sony offered the fi rst home video tape recorder, called the Betamax. Other manufacturers soon offered their own units. The units offered by other man-ufacturers all used the VHS tape format, and movies could be played on any brand’s machine, except Sony’s machine. Eventually, Sony had to abandon Betamax and issued its own VHS format tape recorders.

You can do online research to fi nd more details on these and other famous product failures.

CHAPTER OVERVIEWIn this chapter, mathemati-

cal modeling is used to

model a business. Point out

that the word model can be

used as a noun or a verb.

You can create a mathemati-

cal model, or model a real-

life situation mathematically.

Students learn to graph and

interpret scatterplots, linear

functions, and parabolas.

REALLY? REALLY!Encourage students to

look on the Internet to fi nd

other product failures. Even

Albert Einstein had failed

inventions. Have students

fi nd the failed inventions

of Einstein. Make sure

students understand the

difference between a failed

invention and a product

that just doesn’t appeal to

consumers.


64 Chapter 2 Modeling a Business

How do scatterplots display trends?Any set of numbers is called a set of data. A single set of numbers is called univariate data. When a business owner keeps a list of monthly sales amounts, the data in the list is univariate data. Data that lists pairs of numbers and shows a relationship between the paired numbers is called bivariate data. If a business owner keeps records of the number of units sold each month and the monthly sales amount, the set is bivari-ate data.

A scatterplot is a graph that shows bivariate data using points on a graph. Scatterplots may show a general pattern, or trend, within the data. A trend means a relationship exists between the two variables.

A trend may show a correlation, or association, between two variables. A positive correlation exists if the value of one variable increases when the value of the other increases. A negative correlation exists if the value of one variable decreases when the value of the other variable increases.

A trend may also show a causal relationship, which means one variable caused a change in the other variable. The variable which causes the change in the other variable is the explanatory variable. The affected vari-able is the response variable. While a trend may indicate a correlation or a causal relationship, it does not have to. If two variables are correlated, it does not mean that one caused the other.

correlation• positive • correlationnegative • correlation

Key Termsdata• univariate data• bivariate data• scatterplot• trend•

ObjectivesGraph bivariate •

data.

Interpret trends •

based on

scatterplots.

Draw lines and •

curves of best fi t.

Interpret Scatterplots2-1

To guess is cheap. To guess wrongly is expensive.Ancient Chinese Proverb

causal • relationshipexplanatory • variableresponse variable•

or aposoneothexiwhin

caonvatheatrv

© GEMPHOTOGRAPHY, 2009/USED UNDER LICENSE FROM SHUTTERSTOCK.COM

EXAMINE THE QUESTIONShow students how a

scatterplot can depict a

trend, and how trends affect

business decisions.

Give students several

examples of univariate and

bivariate data.

CLASS DISCUSSIONAsk students to give a

defi nition of function. Provide

examples of scatterplots that

are functions and scatterplots

are not functions. Have stu-

dents identify the differences.


2-1 Interpret Scatterplots 65

Choose a scale for each axis that allows the scatterplot to fi t in the required space. To choose the scale, look at the greatest and least

numbers that must be plotted for each variable. Label the axes accord-ingly. Then plot each point with a dot. Notice that you do not connect the dots in a scatterplot.

Use the statistics features on your graphing calculator to graph the scatterplot. Your display should look similar to the one shown.

Skills and Strategies

You can graph a scatterplot by hand. You can also graph a scatterplot on a graphing calculator.

EXAMPLE 1

Rachael runs a concession stand at the park, where she sells water bottles. She keeps a list of each day’s high temperature and the number of water bottles she sells each day. Rachael is looking for trends that relate the daily high temperature to the number of water bottles she sells each day. She thinks these two variables might be related and wants to investigate possible trends using a scatterplot. Below is the list of her ordered pairs.

(65, 102), (71, 133), (79, 144), (80, 161), (86, 191),

(86, 207), (91, 235), (95, 237), (100, 243)

Construct a scatterplot by hand on graph paper. Then enter the data in a graphing calculator to create a scatterplot.

SOLUTION In each ordered pair, the fi rst number is the high temperature for the day in degrees Fahrenheit. The second number is the number of water bottles sold. Think of these as the x- and y-coordinates. The scatter-plot is drawn by plotting the points with the given coordinates.

140

100

180

1008070 90

220

y

x

Temperature (˚F)

Wat

er B

ottle

Sal

es

260

TEACHAs students learn about

scatterplots, be sure they

realize that a scatterplot is

a graph of a set of ordered

pairs that may or may not

show a relationship. They

likely remember that to

show an equation, ordered

pairs are graphed on a

coordinate plane and then

connected. Point out that

points graphed on a scat-

terplot are not connected.

The position of the points

are examined to determine

the existence and strength

of a correlation.

Spend time discussing the

difference between correla-

tion and causation. Stu-

dents need to understand

that just because two sets

of data have a correlation,

there may or may not be a

causation between the sets.

EXAMPLE 1Discuss with students the

likelihood that this problem

involves causation—the

temperature is responsible

for an increase in the water

sales.

Compare this example to

the following scenario:

As the sales of ice cream

increase, the number of

lifeguard rescues increases.

Students should recognize

that ice cream does not

cause the need for rescues,

but both increase as the

temperature increases.

When it gets hotter, more

people swim (making for an

increased need for lifeguard

rescues), and more people

eat ice cream.



EXAMPLE 2

Rachael wants to interpret the trend shown in the scatterplot. What do you notice about the relationship between temperature and water bottle sales? Is there an explanatory variable and a response

variable?

SOLUTION As the temperature rises, the water bottle sales gen-erally increase. So, there is a correlation between the data.

Because the y-values increase when the x-values increase, the correlation is positive. Additionally, the rise in tempera-ture caused the increase in the number of bottles sold. Therefore, the temperature is the explanatory variable and the number of bottles sold is the response variable.

CHECK ■ YOUR UNDERSTANDINGA local coffee shop sells hot chocolate. The manager keeps track of the temperature for the entire year and the hot chocolate sales. A scatterplot is graphed with temperature on the horizontal axis and hot chocolate sales on the vertical axis. Do you think the scatterplot shows a positive or negative correlation? Is there causation? Explain.

EXAMPLE 3

Determine if the following scatterplot depicts a positive correlation or a negative correlation.

SOLUTION As the x-values increase, the y-values decrease. Therefore, this scatterplot shows a negative correlation between the two variables.

CHECK ■ YOUR UNDERSTANDINGA local medical school is studying growth of students in grades 1–12. The height of each student in inches and the length of each student’s foot in centimeters is recorded, and a scatterplot is constructed. Do you think the scatterplot shows a positive correlation or a negative correlation? Is there causation?

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CHECK ■ YOUR UNDERSTANDINGIf the temperature reaches 68 degrees Fahrenheit tomorrow, about how many water bottles do you predict will be sold? Explain.

CHECK YOUR UNDERSTANDINGAnswer approximately

120 water bottles

EXAMPLE 2Ask students what they

think the scatterplot would

look like if temperature was

compared to sweater sales.

They should realize that

as temperatures increase,

sales of sweaters decrease.

CHECK YOUR UNDERSTANDINGAnswer Because sales

decrease when the tem-

perature increases, the

correlation is negative.

This correlation is probably

causal, so temperature is

the explanatory variable

and hot chocolate sales is

the response variable.

EXAMPLE 3Compare the trends in the

scatterplots to what students

remember about slopes of

lines. Explain that the sign of

the “slope” of the scatterplot

is the same as the sign of the

correlation.

Ask students to think of two

variables that are positively

correlated, but one variable

does not cause the other.

CHECK YOUR UNDERSTANDINGAnswer Taller people

generally have larger feet,

so a positive correlation is

expected. There is causation.



EXAMPLE 4

An elementary school principal compiled the following data about ten students at Compsett Elementary School. The fi rst number represents a student’s height in inches. The second number is the student’s reading level. Create a scatterplot of the data. Do you think a person’s height causes a higher read-ing level?

SOLUTION The scatterplot shows a positive correlation.

A person’s height does not cause a higher reading level. Most likely, both height and reading level for elementary school students increase with age. Keep in mind that if two variables are correlated, they are associated in some way. The student’s height does not cause the read-ing levels to be a certain value.

CHECK ■ YOUR UNDERSTANDINGThink of an example of data that might have a negative correlation but there is no causation.

EXAMPLE 5

The scatterplot at the right shows the relationship between the number of text messages made by each of ten juniors while studying for Mr. Galati’s chemistry test last week and their scores on the test. Describe the trends you see in the data.

SOLUTION As the number of text messages increases, test grades do not increase, so there is no positive correlation. As the number of text messages increases, test grades do not decrease, so there is no negative correlation. There is no trend in the data, so there is no correlation.

CHECK ■ YOUR UNDERSTANDINGStudents in a biology class measure the circumference and diameter of every tree on the school property. The students create a table of ordered pairs and plan to draw a scatterplot. Should there be a positive correlation, a negative correlation, or no correlation?

Height (inches) Reading Level

48 5.8

63 9.2

49 5.5

43 4.1

46 6.1

55 7.6

59 8.1

60 10.0

47 4.9

50 7.7

EXAMPLE 4Point out to students that

reading level and height

both increase due to their

dependence on age. In this

case, age is called a lurking

variable.

CHECK YOUR UNDERSTANDINGAnswer Answers will

vary. Sample answer: miles

a car is driven and balance

of a loan on the car.

EXAMPLE 5In the next lesson students

will learn about describing

a correlation numerically,

using a correlation coef-

fi cient.

CHECK YOUR UNDERSTANDINGAnswer Based on the

formula C = πd, as the

diameter increases, the

circumference increases.


1. Use what you learned in this lesson to explain how the quote can be interpreted by a business person.

2. A scatterplot shows the number of days that have passed and the number of days left in a month. The explanatory variable is the number of days that have passed. The response variable is the num-ber of days left. Is there a positive or negative correlation? Explain.

3. Examine each scatterplot. Identify each as showing a positive corre-lation, a negative correlation, or no correlation.

To guess is cheap. To guess wrongly is expensive.Ancient Chinese Proverb

Applications

4. In a–d, each set of bivariate data has a causal relationship. Determine the explanatory and response variables for each set of data.a. height and weight of a student b. grade on a math test and number of hours the student

studied c. number of hours worked and paycheck amount d. number of gallons of gas consumed and weight of a car

5. The table shows the personal income per capita (per person) in the United States for seven selected years.a. Draw a scatterplot for the data. b. Describe the correlation.

Year

Per Capita Income in

Dollars

2002 30,838

2003 31,530

2004 33,157

2005 34,690

2006 36,794

2007 38,615

2008 39,751


e. f.

d.c.

b.a.

See margin.

increases, the number of days left decreases.

negative correlation


positive correlation

no correlation

negative correlation no correlation

height-explanatory; weight-response

hours-explanatory; grade-response

weight-explanatory; gallons-response

See margin.


Negative correlation; as the number of days that have passed

TEACHVocabulary Review Remind students that the

terms explanatory and

response are used when

causation is implied. Have

students offer original

pairs of variables, tell how

they are correlated, and

determine if there seems to

be causation.

ANSWERS1. When making a business

decision, it is wise to use

available data and graphs

to analyze trends, rather

than guessing and subse-

quently investing money

on a “hunch.”

4c. hours-explanatory;

paycheck-response

5a.

See margin.



6. The following set of ordered pairs gives the results of a science exper-iment. Twelve people were given different daily doses of vitamin C, in milligrams, for a year. This is the x-value. They reported the num-ber of colds they got during the year. This is the y-value.

(100, 4), (100, 4), (100, 3), (250, 3), (250, 2), (250, 2),

(500, 1), (500, 2), (500, 1), (1,000, 1), (1,000, 2), (1,000, 1)

a. Construct a scatterplot. b. Describe the correlation. c. Should the scientists label the vitamin C intake the explanatory

variable and the number of colds the response variable? Explain.

7. The enrollment at North Shore High School is given in the table. In each year, the number of students on the baseball team was 19.a. If x represents the year and y represents the

enrollment, draw a scatterplot to depict the data.

b. Describe the correlation from the scatterplot.

c. If x represents the enrollment and y represents the number of students on the baseball team, draw a scatterplot to depict the data.

d. Describe the correlation from the scatterplot.

8. The MyTunes Song Service sells music downloads. Over the past few years, the service has lowered its prices. The table shows the price per song and the number of songs downloaded per day at that price.

Year Enrollment

2006 801

2007 834

2008 844

2009 897

2010 922

Price per Song

Number of Downloads (in

thousands)

$0.89 1,212

$0.79 1,704

$0.69 1,760

$0.59 1,877

$0.49 1,944

$0.39 2,011

a. Examine the data without drawing a scatterplot. Describe any trends you see.

b. Draw a scatterplot. Describe the correlation. c. Approximate the number of downloads at a price of $0.54 per

song. Explain your reasoning.

9. Perform an online search to answer the questions below. a. Find your state’s population for each of the last ten years.b. Create a table of bivariate data. Let x represent the year, and let

y represent the population.c. Create a scatterplot for the data.d. Describe the correlation between the year and your state’s

population.

See margin.


Yes; it seems to be causal.

TEACHData EntryStudents need to double

check calculator list entries

before making calculations.

The calculator will display

incorrect answers just as

quickly as it will correct

answers if data are entered

incorrectly. It is very easy to

make a mistake entering data.

Also remind them to check

the number of pieces of data

they entered, to make sure it

agrees with the original list.

ANSWERS6a.

7a.

7c.

8a. As x decreases,

y increases.

8b. There is a negative

correlation.

8c. Approximately

1,910,500 songs. The

average of $0.59 and

$0.49 is $0.54 and the

average of 1,877 and

1,944 is 1,910.

See margin.


See margin.

no correlation

See margin.

See margin.

See margin.

Answers vary.



How can the past predict the future?Many scatterplot points can be approximated by a single line that best fi ts the scattered points. This line may be called a: line of best fi t, linear regression line, or least squares line. This line can be used to display a trend and predict corresponding variables for different situations. It is more effi cient to rely on the single line rather than the scatterplot points because the line can be represented by an equation.

Recall that the domain is a set of fi rst elements of the ordered pairs, and the range is the set of corresponding second elements. Interpolation means to predict corresponding y-values, given an x-value within the domain. Extrapolation means to predict corre-sponding y-values outside of the domain.

The scatterplot shown is from Example 1 in the previous lesson. The line shown is a line of best fi t because it closely follows the trend of the data points. The blue labels are included to identify the axes, but will not be shown on a calculator display. Generally, the distance the points lie from

the line of best fi t determines how good a predictor the line is. If most of the points lie close to the line, the line is a better predictor of the trend of the data than if the points lie far from the line. If the points lie far from the line, the line is not good for predicting a trend.

The correlation coeffi cient, r, is a number between –1 and 1 inclu-sive that is used to judge how closely the line fi ts the data. Negative cor-

relation coeffi cients show negative correlations, and positive correlation coeffi cients show positive correlations. If the correlation coeffi cient is near 0, there is little or no correlation. Correlation coeffi cients with an absolute value greater than 0.75 are strong correlations. Correlation coeffi cients with an absolute value less than 0.3 are weak correlations. Any other correlation is a moderate correlation.

interpolation• extrapolation• correlation coeffi cient• strong correlation• weak correlation• moderate correlation•

Key Termsline of best fi t• linear regression • lineleast squares line• domain• range•

ObjectivesBe able to fi t a •

regression line to a

scatterplot.

Find and interpret •

correlation

coeffi cients.

Make predictions •

based on lines of

best fi t.

Linear Regression2-2

The only useful function of a statistician is to make predictions, and thus provide a basis for action.

William Edwards Deming, Professor and Statistician

Temperature (˚F)

Wat

er B

ottle

Sal

es

EXAMINE THE QUESTIONThe trends shown by

scatterplots can be used

to predict the future. But

making a prediction without

a line of best fi t to guide

you would be arbitrary.

Point out that changes

could make the prediction

inaccurate. However, the

predictions are based on

current data and are better

than haphazard guessing.

CLASS DISCUSSIONPut a scatterplot on the

board and point to different

x-values in the domain. For

each, ask students if it is an

example of interpolation or

extrapolation.

What can you tell about the

sign of the correlation coef-

fi cient and the slope of the

regression line?


2-2 Linear Regression 71

CHECK ■ YOUR UNDERSTANDINGApproximately how many more water bottles will Rachael sell if the temperature increases 2 degrees?

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The line of best fi t and the correlation coeffi cient can be found using a graphing calculator.

EXAMPLE 1

Find the equation of the linear regression line for Rachael’s scatterplot in Example 1 from Lesson 2-1. Round the slope and y-intercept to the nearest hundredth. The points are given below.

(65, 102), (71, 133), (79, 144), (80, 161), (86, 191),

(86, 207), (91, 235), (95, 237), (100, 243)

SOLUTION Although it is possible to fi nd the linear regression equation using paper and pencil, it is a lengthy process. Using the linear regres-sion feature on a graphing calculator produces more accurate results.

Enter the ordered pairs into your calculator. Then use the statistics menu to calculate the linear regression equation. The equation is of the form y = mx + b, where m is the slope and b is the y-intercept. Rounding the slope and y-intercept to the nearest hundredth, the equation of the regression line is y = 4.44x – 187.67.

Note that calculators may use different letters to represent the slope or the y-intercept. Remember that the coeffi cient of x is the slope.

CHECK ■ YOUR UNDERSTANDINGFind the equation of the linear regression line of the scatterplot defi ned by these points: (1, 56), (2, 45), (4, 20), (3, 30), and (5, 9). Round the slope and y-intercept to the nearest hundredth.

EXAMPLE 2

Interpret the slope as a rate for Rachael’s linear regression line. Use the equation from Example 1.

SOLUTION The formula for slope is m = ∆y

___ ∆x

. The range val-

ues, y, represent bottles sold and the domain values, x, repre-

sent temperatures. The slope is a rate of bottles per degree. The slope is 4.44, which means that for each one-degree increase in temperature, 4.44 more water bottles will be sold. Rachael cannot sell a fraction of a water bottle, so she will sell approx-imately 4 more bottles for each degree the temperature rises.

TEACHTo enter regression lines

and have them graphed

on the calculator’s display

along with the scatterplot,

students need to be sure

they have the scatterplot

and the equation set to dis-

play on the same screen.

EXAMPLE 1Different calculators have

keys in different locations with

different names, but the basic

functions are similar. Remind

students to input data care-

fully. An incorrect entry results

in an incorrect answer.

CHECK YOUR UNDERSTANDINGAnswer y = –11.9x + 67.7

EXAMPLE 2Review the units of the slopes

for the examples shown

throughout Lesson 2-1, so

students understand that the

slope is a rate of change.

CHECK YOUR UNDERSTANDINGAnswer 9 bottles



EXAMPLE 3

Rachael is stocking her concession stand for a day in which the tem-perature is expected to reach 106 degrees Fahrenheit. How many water bottles should she pack?

SOLUTION The linear regression equation tells Rachel the approximate number of bottles she should sell given a specifi c temperature. Substitute 106 for x in the equation, and compute y, the number of water bottles she should expect to sell.

Equation of the

regression line y = 4.44x – 187.67

Substitute 106 for x. y = 4.44(106) – 187.67

Simplify. y = 282.97

If the trend continues and the temperature reaches 106 degrees Fahrenheit, Rachael should expect to sell approximately 283 water bottles. She should stock 283 bottles. This is an example

of extrapolation because 106 degrees Fahrenheit was not between the high and low x-values of the original domain.

CHECK ■ YOUR UNDERSTANDINGHow many water bottles should Rachael pack if the temperature forecasted were 83 degrees? Is this an example of interpolation or extrapolation? Round to the nearest integer.

EXAMPLE 4

Find the correlation coeffi cient to the nearest hundredth for the linear regression for Rachael’s data. Interpret the correlation coeffi cient.

SOLUTION Use a graphing calculator to fi nd the correlation coeffi cient.

Round r to the nearest hundredth. r = 0.97

Because 0.97 is positive and greater than 0.75, there is a strong positive correlation between the high temperature and the number of water bottles sold.

CHECK ■ YOUR UNDERSTANDINGFind the correlation coeffi cient to the thousandth for the linear regression for the data in Check Your Understanding for Example 1. Interpret the correlation coeffi cient.

EXTEND ■ YOUR UNDERSTANDINGCarlos entered data into his calculator and found a correlation coeffi cient of – 0.28. Interpret this correlation coeffi cient.

SOLRachsho106num

Eq

reg

Su

Si

IfreeS

of extrapolation becaushi h d l l

© VASILIY KOVAL 2009/USED UNDER LICENSE

FROM SHUTTERSTOCK.COM

CHECK YOUR UNDERSTANDINGAnswer 181 water bottles;

it is an example of interpo-

lation.

EXAMPLE 4Have students identify all

correlations as strong, mod-

erate, or weak.

It is a common error for

students to ignore nega-

tive signs when reading

correlation coeffi cients on

calculator displays. Caution

them to note the sign of the

coeffi cient.

CHECK YOUR UNDERSTANDINGAnswer r = –0.998; this

coeffi cient represents a

strong negative correlation.

EXTEND YOUR UNDERSTANDINGAnswer The correlation is

weak and negative.

EXAMPLE 3Ask students if this is an

example of interpolation or

extrapolation.


2-2 Linear Regression 73

1. Apply what you have learned in this lesson to give an interpretation of the quote.

2. Over the past four years, Reggie noticed that as the price of a slice of pizza increased, her college tuition also increased. She found the cor-relation coeffi cient was r = 0.49. Which of the following scatterplots most accurately displays Reggie’s data? Explain.

3. In Exercise 2, would the price of a slice of pizza be labeled as the explan-atory variable and the tuition as the response variable? Explain.

4. The table gives enrollments at North Shore High School.a. Find the equation of the regression line. Round the slope and

y- intercept to the nearest hundredth. b. What is the slope of the linear regression line? c. What are the units of the slope expressed as a rate? d. Based on the linear regression line, how many students will be

enrolled in the year 2016? Round to the nearest integer. e. Is your answer to part d an example of interpolation or extrapola-

tion? Explain. f. Find the correlation coeffi cient to the nearest hundredth. g. Describe the correlation.

5. Examine the data from Exercise 4.a. Find the mean (arithmetic average) of the fi ve years. b. Find the mean of the fi ve enrollment fi gures. c. Create an ordered pair whose x-value is the mean of the years

and whose y-value is the mean of the enrollments. d. Show that the ordered pair satisfi es the linear regression equation.

What does this mean regarding the regression line?

6. Describe each of the following correlation coeffi cients using the terms strong, moderate, or weak and positive or negative.a. r = 0.21 b. r = – 0.87 c. r = 0.55 d. r = – 0.099 e. r = 0.99 f. r = – 0.49

The only useful function of a statistician is to make predictions, and thus provide a basis for action.

William Edwards Deming, Professor and Statistician

Applications

Year Enrollment

2006 801

2007 834

2008 844

2009 897

2010 922

a. b.

See margin.

See margin.

No, there isno apparent causation. Both prices may have increased due to infl ation over time.

2008

859.6

y = 30.5x – 60,384.4

30.5

students per year

1,104 students

Extrapolation; 2016 is outside of the domain.

r = 0.98

strong positive correlation

TEACHInvestigate Correlation Coeffi cientAt some point, have

students switch the x and

y variables and fi nd the

correlation coeffi cient. They

should see it remains the

same. However, the slope of

the regression line changes.

ANSWERS 1. The ability to make

predictions is valuable in

many fi elds. It allows you

to be proactive in regards

to the future, rather

than just assuming you

have no control over the

future.

2. Graph a shows a moder-

ate correlation that could

be described by r = 0.49.

Graph b is almost linear

and shows a strong cor-

relation.

5d. y = 30.5x – 60,384.4

y = 30.5(2008) –

60,384.4 = 859.6. The

linear regression line

always passes through

the point formed by the

averages of each set of

data.

(2008, 859.6)

See margin.

weak positive strong negative

moderate positive

strong positive

weak negative

moderate negative



Amount of Restaurant Bill ($)

Tip Amount ($)

45.55 7.00

52.00 15.00

66.00 6.00

24.44 6.00

57.90 15.00

89.75 23.00

33.00 8.00

7. The table gives the number of songs downloaded from MyTunes at different prices per song.a. Find the equation of the linear

regression line. Round the slope and y-intercept to the nearest hundredth.

b. What is the slope of the linear regression line?

c. What are the units of the slope when it is expressed as a rate?

d. Based on the linear regression line, how many thousands of downloads would MyTunes expect if the price was changed to $0.45? Round to the nearest integer.

e. Is your answer to part d an example of interpolation or extrapolation?

f. Find the correlation coeffi cient to the nearest hundredth. g. Describe the correlation.

8. Julie is a waitress. On the left is a log of her tips for yesterday’s shift.a. Find the equation of the linear regression line. Round the slope

and y-intercept to the nearest hundredth. b. What is the slope of the linear regression line? c. What are the units of the slope when it is expressed as a rate? d. Based on the linear regression line, what tip would Julie receive if

the restaurant bill were $120? Round to the nearest dollar. e. Is your answer to part d an example of interpolation or extrapola-

tion? Explain. f. Find the correlation coeffi cient for this data. Round to the near-

est hundredth. g. Describe the correlation. h. Based on the linear regres-

sion line, Julie creates a spreadsheet to compute predicted tips for any restau-rant bill amount. Write the formula that can be used to compute the predicted tips in column B.

9. Explain why the sign of the slope of a regression line must be the same as the sign of the correlation coeffi cient.

10. Which of the following scatterplots shows a correct line of best fi t?

11. Is it possible for a linear regression line to go through every point on the scatterplot? Is it possible for a linear regression line to not go through any point on the scatterplot?

Price per Song

Number of Downloads

(in thousands)

$0.89 1,212

$0.79 1,704

$0.69 1,760

$0.59 1,877

$0.49 1,944

$0.39 2,011

A B

1 Restaurant Bill Predicted Tip

2

3

4

5

b. c.a.

See margin.

ANSWERS8c. tip dollars per restau-

rant bill amount

9. A positive slope means

the line is increasing,

which means as

x increases, y increases.

If y increases as

x increases, the cor-

relation coeffi cient is

positive. A negative

slope means the line

is decreasing, which

means as x increases,

y decreases. If y

decreases as x increases,

the correlation coeffi cient

is negative.

11. Yes, if the points are

linear, the regression

line will go through

every point. If the points

are not linear, it may not

go through any point on

the scatterplot.

TEACHExamine ScatterplotsFor all examples, ask stu-

dents about the shape of

the scatterplots (linear or

not), the sign of the associa-

tion (positive or negative),

and the strength (strong,

moderate, weak) of the cor-

relation. They should

get comfortable using

these terms to describe

scatterplots.

y = –1,380.57x + 2,634.90

–1,380.57

thousands of downloads per dollar

2,014

interpolation

r = – 0.90

strong negative correlation

y = 0.22x – 0.27

0.22

$26

Extrapolation; $120 is outside of the original domain.

r = 0.75

moderate positive correlation

=A2*0.22–0.27

See margin.

c

See margin.


2-3 Supply and Demand 75

How do manufacturers decide the quantity of a product they will produce?Economists often call a new, unnamed product a widget. If a business develops a new product, the number of items they need to manufacture is a key question they need to address. Graphs may be used to help answer this question. Such graphs compare the price of an item, p, and the quantity sold, q. The horizontal axis is labeled p and the vertical axis is labeled q. The set of p values on the horizontal axis is the domain. The set of q values on the vertical axis is the range. A function is a rule that assigns a unique member of the range to each element of the domain.

Graphs using the p- and q- axes can be used to model a trend in consumers’ inter-est in a product. A demand function relates the quantity of a product to its price. If a widget has a low price, many people may want it and will be able to afford it, so a large quantity may be sold. If it has a high price, fewer widgets will be sold. As the price increases, demand (the quantity consumers want) is likely to decrease, and as price decreases, demand increases. The graph of the demand function has a negative slope. However, its curvature varies.

Graphs using p- and q- axes can also be used to model a trend in the manufacturing of a product. Producers provide supply (the quantity of items available to be sold). If a widget sells for a high price, the manufacturer may be willing to produce many items to maximize profi t. If the widget sells for a lower price, the manufacturer may produce less. As price increases, supply increases. The graph of the supply func-tion has a positive slope. Its curvature also varies.

demand• supply• wholesale • price

Key Termswidget• function• demand • function

ObjectivesUnderstand •

the slopes of

the supply and

demand curves.

Find points of •

equilibrium.

Supply and Demand 2-3

q

p

q

p

q

p

markup• retail price• equilibrium• shift•

q

p

q

p

q

p

Teach a parrot the terms “supply and demand” and you’ve got an economist.

Thomas Carlyle, Philosopher

EXAMINE THE QUESTIONHave students imagine they

are starting a new busi-

ness. What are the dangers

of overproducing? (excess

inventory and wasted

money) What are the dan-

gers of underproducing?

(lost income) Deciding how

many items to produce is

not guesswork.



Economic decisions require research, and knowledge of the laws of supply and demand. To examine the law of supply and demand, graph both functions on the same axes. Examine what happens as the manufacturer sets different prices. Keep in mind that the manufac-turer sells the items to retailers, such as stores, and not directly to the general public. The price the manufacturer charges the retailer is the wholesale price. Retailers increase the price a certain amount, called markup, so the retailer can make a profi t. The price the retailer sells the item to the public for is the retail price.

Look at the graph on the left. If the price is set at $3.00, consumers will demand h widgets, and manufacturers will be willing to supply k widgets. There will be a shortage of widgets. High demand and low supply often create a rise in price. The manufacturer knows that people want widgets, yet there are not enough of them. If the price rises, demand will fall.

Look at the center graph. If the price is set at $7.00, consumers will demand k widgets, and manufacturers will be willing to supply h widgets. There will be too much supply, and manufacturers will have to lower the price to try and sell the high inventory of widgets.

Look at the graph on the right. At a price of $6.00, the number of widgets demanded by consumers is equal to the number of widgets man-ufacturers will supply. Where the functions of supply and demand inter-sect, the market is in equilibrium.

q

p

q

p

q

p

h

3

k

Supply

Demand

Supply

Demand

hk

Supply

Demand7 6

h

Supply depends on the expenses involved in producing a widget and the price for which it can be sold. The factors of supply will be outlined in Lesson 2-4. This lesson concentrates on demand.

EXAMPLE 1

The Wacky Widget Company sells widgets for $2.00 each wholesale. A local store has a markup of $1.59. What is the retail price?

SOLUTION Add the markup to the wholesale price.

Markup + Wholesale price = Retail price 2.00 + 1.59 = 3.59

The retail price is $3.59.

CHECK ■ YOUR UNDERSTANDINGThe wholesale price of an item is x dollars. The retail price is r dollars. Express the markup algebraically.


CLASS DISCUSSIONGive students other exam-

ples of functions, including

non-numerical examples.

For example, the initials

function assigns fi rst initials

to people. The hair color

function assigns a color to a

person based on their hair

color. Use examples such

as these to show that two

different elements of the

domain could be mapped

to the same element of the

range.

Ask students about any

products that are diffi cult to

fi nd because stores don’t

always have them in stock.

TEACHSupply and demand are

concepts that impact stu-

dents’ lives, yet they have

probably never given much

thought to them. Be sure

they can give examples of

the supply and demand

for products they typically

purchase or use.


the markup is not all profi t.

Markup costs are used to

cover the store’s expenses.

Ask them to identify some

of these expenses, which

include rental costs, paying

employees, advertising,

utility costs, and purchasing

store fi xtures.

CHECK YOUR UNDERSTANDINGAnswer r – x

Sometimes students have

trouble expressing literal

subtraction expressions,

and they misplace the min-

uend and the subtrahend.



EXAMPLE 2

The Robear Corporation sells teddy bears at a wholesale price of $23.00. If a store marks this up 110%, what is the retail price?

SOLUTION Compute the markup amount. Then calculate the retail price.

Markup rate × Wholesale price = Markup 1.10 × $23 = $25.30

Wholesale price + Markup = Retail price $23.00 + $25.30 = $48.30

The retail price is $48.30.

CHECK ■ YOUR UNDERSTANDINGA banner company sells 5-foot banners to retailers for x dollars. The St. James Sign Shop marks them up 90%. Express the retail price at the St. James store algebraically.

EXAMPLE 3

The graph shows the supply and demand curves for a widget. Explain what happens if the price is set at $9.00.

SOLUTION Because $9.00 is less than the equilibrium price, demand will exceed supply. Suppliers will attempt to sell the widget at a higher price.

CHECK ■ YOUR UNDERSTANDINGUse the graph to explain what happens if the price is set at $15.00.

EXAMPLE 4

A company wants to base the price of its product on demand for the product, as well as on expenses. It takes a poll of several of its current retailers to fi nd out how many widgets they would buy at different wholesale prices. The results are shown in the table. The company wants to use linear regression to create a demand function. What is the equation of the demand function? Round the slope and y-intercept to the nearest hundredth.

SOLUTION Use the linear regression feature on your graphing cal-culator. The equation is q = –1,756.19p + 30,238.82. This represents the demand function.

q

p11

Supply

Demand

Wholesale Price ($) (p)

Quantity Retailers Would Purchase

(in thousands) (q)

15.25 3,456

15.50 3,005

15.75 2,546

16.00 2,188

16.25 1,678

16.50 1,290

16.75 889

17.00 310

CHECK ■ YOUR UNDERSTANDINGExplain why it makes sense that the demand function has a negative slope.

EXAMPLE 2Point out to students that a

100% markup is the same as

doubling the wholesale price.

CHECK YOUR UNDERSTANDINGAnswer x + 0.9x, or 1.09x.

EXAMPLE 3Point out the importance

of labeling the axes and

advise students to label all

problems.

CHECK YOUR UNDERSTANDINGAnswer Supply will exceed

demand. Suppliers will

attempt to sell the excess wid-

gets by lowering the price.

EXAMPLE 4Remind students that the

linear regression line is an

“average” line, and if they

substitute the wholesale

prices from the table into

the regression equation,

they will not get the quantity

shown in the table, unless

the regression line goes

through the point with those

coordinates. That is unlikely.

CHECK YOUR UNDERSTANDINGAnswer As the price

increases, less quantity is

demanded, so the demand

function slopes downward.

This is indicated by a nega-

tive slope.


1. Interpret the quote in the context of what you learned in this lesson.

2. An automobile GPS system is sold to stores at a wholesale price of $97. A popular store sells them for $179.99. What is the store’s markup?

3. A CD storage rack is sold to stores at a wholesale price of $18.a. If a store has a $13 markup, what is the retail price of the

CD rack? b. Find the percent increase of the markup to the nearest percent.

4. A bicycle sells for a retail price of b dollars from an online store. The wholesale price of the bicycle is w.a. Express the markup algebraically. b. Express the percent increase of the markup algebraically.

5. The graph shows supply and demand curves for the newest SuperWidget.

Teach a parrot the terms “supply and demand” and you’ve got an economist.

Thomas Carlyle, Philosopher

Applications

q

p$1.12

Supply

Demand$0.98

y

x

q

p35

Supply

Demand


a. What is the equilibrium price? b. What will happen if the price is set at $0.98? c. How many SuperWidgets are demanded at a price of $0.98? d. How many SuperWidgets are supplied at a price of $0.98? e. What will happen if the price is set at $1.22?

6. The graph below shows supply and demand curves for a new mp3 player accessory.a. What is the equilibrium price? b. Describe the relationship of supply and demand if the item were

sold for $20. c. Describe the relationship of supply

and demand if the item were sold for $40.

d. Name the domain that will increase demand.

e. Name the domain that will increase supply.

See margin.

$82.99

72%

b – w

TEACHShifts of Demand Curves Notice that when a demand

curve is shifted to the right,

some students may see this

as shifted “up.” Similarly,

when a curve is shifted left,

it may appear to be shifted

“down.” Try to have stu-

dents use left and right to

describe the shifts.

ANSWERS1. Parrots repeat the things

they hear over and over.

Supply and demand is

such an important con-

cept in economics that

it is constantly used by

economists.

5b. Demand will exceed

supply, and suppliers

will attempt to sell the

product at a higher

price.

5e. Supply will exceed

demand, and suppli-

ers will attempt to sell

the excess product at a

lower price.

6b. Demand will exceed

supply, and suppliers


product at a higher

price.

6c. Supply will exceed

demand, and suppliers


excess product at a

lower price.

$31

b – w

______ w

• 100

$1.12

See margin.

y

x

See margin.

$35

See margin.

See margin.

x < 35

x > 35



7. The supply and demand curves for a new widget are shown in the graph. Notice there are two demand curves. The original demand curve is d1. Months after the product was introduced, there was a possible health concern over use of the product, and demand dropped to the new demand curve, d2. The movement of the demand curve is called a shift.a. What was the equilibrium price before the demand shift? b. What was the equilibrium quantity before the demand shift? c. What was the equilibrium price after the demand shift? d. What was the equilibrium quantity

after the demand shift? e. Express algebraically the difference in

quantity demanded at price b before and after the shift.

f. Copy a rough sketch of the graph into your notebook. Label the curves. Where would the demand curve have shifted if a health benefi t of the new widget was reported?

8. Debbie is president of a company that produces garbage cans. The company has developed a new type of garbage can that is animal-proof, and Debbie wants to use the demand function to help set a price. She surveys ten retailers to get an approximation of how many garbage cans would be demanded at each price, and creates a table.a. Find the equation of the linear regression line. Round the slope

and y-intercept to the nearest hundredth. b. Give the slope of the regression line and interpret the slope as a

rate. c. Find the correlation coeffi cient and interpret it. Round to the near-

est hundredth. d. Based on the linear regression line, how many garbage cans

would be demanded at a wholesale price of $18.00? Round to the nearest hundred garbage cans.

e. Was your answer to part d an example of extrapolation or inter-polation? Explain.

f. Look at your answer to part d. If the company sold that many garbage cans at $18.00, how much money would the company receive from the garbage can sales?

9. A company that produces widgets has found its demand function to be q = –1,500p + 90,000.a. For each dollar increase in the wholesale price, how many fewer

widgets are demanded? b. How many widgets would be demanded at a price of $20? c. How many widgets would be demanded at a price of $21? d. What is the difference in quantity demanded caused by the $1

increase in wholesale price? e. The company sets a price of $22.50. How many widgets will be

demanded? f. How much will all of the widgets cost the store to purchase at a

price of $22.50? g. If the store marks up the widgets that cost $22.50 at a rate of

50%, what is the retail price of each widget?

q

pb

Supply

d

ad

ce

12

Wholesale Price ($) (p)

Quantity Demanded By Retailers (in hundreds) (q)

13.00 744

13.50 690

14.00 630

14.50 554

15.00 511

15.50 456

16.00 400

16.50 300

17.00 207

17.50 113

TEACHMulti-part ExercisesThese problems have many

parts that depend on previ-

ous parts being answered

correctly. Stress the fact

that calculator list entries

must be checked carefully.

ANSWERS8b. The slope is –136.08.

As a rate, the slope is

expressed as garbage

cans per dollar. For each

dollar increase in price,

about 136 less garbage

cans are demanded.

b

e

a

c

e – c

It would shift to the right.

q = –136.08p + 2,535.79

See margin.

r = –0.99; there is a strong negative correlation.

86 hundred

Extrapolation, $18.00 is not in the domain.

$154,800

1,500

60,000

58,500

1,500 less

56,250

$1,265,625

$33.75


What expenses are involved in the manufacturing process?A group of art school students have decided to start a business producing hand-painted jeans. They made a list of expenses for running the busi-ness. Some of these items must be purchased while others may be rented.

factory space• telephone• paint•

furniture• computer• packaging•

delivery trucks• offi ce supplies• postage•

electricity• jeans• labor• All of these expenses fall into one of two categories—variable expenses or fi xed expenses. Expenses that depend on the number of items pro-duced are variable expenses. Examples of variable expenses are costs for raw materials such as jeans, paint, offi ce supplies, and labor expenses, because these costs change based on the quantity produced.

Some expenses do not change based on the quantity produced. These expenses are fi xed expenses. Examples of fi xed expenses are the cost of the furniture and the computer. The cost of having the lights on is the same regardless of how many items are produced, so this is also a fi xed expense.

The total expenses is the sum of the fi xed and variable expenses. The expense equation is

E = V + F where E represents total expenses, V represents variable expenses, and F represents fi xed expenses

The income a business receives from selling its product is revenue. Revenue is the price for which each product was sold times the number of products sold. The revenue equation is

R = pq where R represents revenue, p represents the price of the product, and q represents the quantity of products sold

The difference obtained when expenses are subtracted from rev-enue is a profi t when positive and a loss when negative. When the expenses and the revenue are equal, there is no profi t or loss. This is the breakeven point.

revenue equation• profi t• loss• breakeven point•

Key Termsvariable expenses • fi xed expenses• expense equation• revenue•

ObjectivesUnderstand the •

difference between

fi xed and variable

expenses.

Create an expense •

equation based on

fi xed and variable

expenses.

Fixed and Variable Expenses2-4


An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.

Laurence J. Peter, Professor

EXAMINE THE QUESTIONStudents have possibly

never brainstormed on all

of the variables that affect

the manufacturing process.

Give them time to think and

formulate answers before

they read the text.

CLASS DISCUSSIONCan you think of any other

expenses involved in the

manufacturing process?

Point out that revenue

depends on quantity sold,

and the quantity sold

depends on the price

charged, so revenue

ultimately depends on the

price charged.


2-4 Fixed and Variable Expenses 81

Business owners use mathematical models to analyze expenses and rev-enue to determine profi tability of a product.

EXAMPLE 1

The art students have researched all of their potential expenses. The fi xed expenses are $17,600. The labor and materials required for each pair of painted jeans produced cost $7.53. Represent the total expenses as a function of the quantity produced, q.

SOLUTION If q units are produced at a cost of $7.53 per unit, the vari-able expenses can be represented by:

V = 7.53q

The fi xed expenses, $17,600, do not depend on the quantity produced. The total expenses, E, are the sum of the variable and the fi xed expenses.

E = V + FE = 7.53q + 17,600

The total expenses, E, are a function of the quantity produced, q.

CHECK ■ YOUR UNDERSTANDINGA widget manufacturer’s expense function is E = 6.00q + 11,000. What are the variable costs to produce one widget?

EXAMPLE 2

Kivetsky Ski Supply manufactures hand warmers for skiers. The expense function is E = 1.18q + 12,000. Find the average cost of producing one pair of hand warmers if 50,000 hand warmers are produced.

SOLUTION Find the total cost of producing 50,000 hand warmers by substituting 50,000 for q in the expense function.

E = 1.18q + 12,000

Substitute. E = 1.18(50,000) + 12,000

Multiply. E = 59,000 + 12,000

Simplify. E = 71,000

To fi nd the average cost, divide the total cost by the number produced.

Divide by 50,000. 71,000

_______ 50,000

= 1.42

The average cost to produce one hand warmer is $1.42 when 50,000 are produced.

CHECK ■ YOUR UNDERSTANDINGThe expense function for a certain product is E = 3.40q + 189,000. Express the average cost of producing q items algebraically.


TEACHRelate what students

know about variables

and constants to the new

vocabulary terms of vari-

able expenses and fi xed

expenses.


the variable expenses part

of the expense equation

needs a variable. The fi xed

part of the equation is also

called a constant.

CHECK YOUR UNDERSTANDINGAnswer $6.00

Ask students the costs of

producing 500 widgets

and 501 widgets. Find the

difference and compare it

to the slope of the expense

function.


intuitively, the average cost

decreases as the number of

items produced increases,

because the fi xed costs are

“spread out” over many

items.

CHECK YOUR UNDERSTANDING

Answer 3.40q + 189,000

_______________ q



EXAMPLE 3

Willie’s Widgets has created a demand function for its widgets, where q is the quantity demanded and p is the price of one widget.

q = –112p + 4,500

Its expense function is E = 3.00q + 18,000. Express the expense function as a function in terms of p.

SOLUTION Because E is a function of q, and q is a function of p, express E as a function of p using substitution.

E = 3.00q + 18,000

Substitute for q. E = 3.00(–112p + 4,500) + 17,600

Distribute. E = –336p + 13,500 + 17,600

Simplify. E = –336p + 31,100

The expense function in terms of the price, p, is E = –336p + 31,100.

CHECK ■ YOUR UNDERSTANDINGA corporation’s expense function is E = 4.00q + 78,000. The demand function was determined to be q = –4p + 3,000. Express E in terms of p.

EXAMPLE 4

Wally’s Widget World created a monthly expense equation, E = 1.10q + 4,200. Wally’s Widget World plans to sell its widgets to retailers at a wholesale price of $2.50 each. How many widgets must be sold to reach the breakeven point?

SOLUTION Use a graphing calculator. Graph the revenue function, R = 2.50q, using R as revenue and q as the quantity sold. Notice that q is the independent variable, so the horizontal axis is labeled q. The labels on the graph below will not be shown on the calculator display.

Graph the revenue function on a coordinate grid.

Graph the expense function on the same coordinate grid. Use your calculator’s graph intersection feature to fi nd the point of intersection.

dolla

rs

q

R = 2.50q

X=3000 Y=7500Intersection

dolla

rs

q

EXAMPLE 3Remind students that

revenue depends on quan-

tity sold, and the quantity

sold depends on the price

charged, so revenue depends

on price. As a result, they can

express revenue in terms of

the variable p.

CHECK YOUR UNDERSTANDINGAnswer E = –16.00p + 90,000

You can give students

similar problems to make

sure they are substituting

correctly.

EXAMPLE 4Remind students to label the

axes and to use these labels.

Since the y- coordinates (the

“heights”) represent dollars,

the revenue and expense

heights can be compared to

see which is greater.

You may put the graph on

the board, and pick a spe-

cifi c value of q. Highlight

the revenue and expenses

at this q-value, and draw

a vertical line connecting

these two points. Explain

that the length of this line

represents the difference

between revenue and

expenses, and is a graphical

representation of profi t.



It will cost $7,500 to manufacture 3,000 widgets. If 3,000 widgets are sold to stores for $2.50 each, the company will receive $7,500. Notice that no profi t is made—the revenue equals the expense. The point (3,000, 7,500) is the breakeven point. Look at sections of the graph before and after the breakeven point to see if you understand what happens.

If more than 3,000 widgets are produced, the company will be operat-ing in the green area of the graph, where R > E. A profi t is made when revenue is greater than expenses.

If less than 3,000 widgets are produced, the company will be operating in the red area of the graph, where E > R. The company is not making enough revenue to pay its expenses.

CHECK ■ YOUR UNDERSTANDINGIf the company sells 2,900 widgets, is Wally’s Widget World operating above or below the breakeven point? What is the difference between revenue and expense?

EXAMPLE 5

Find the solution to Example 4 algebraically.

SOLUTION To fi nd the breakeven point, set the revenue and expense equations equal to each other.

R = E

Substitute. 2.50q = 1.10q + 4,200

Subtract 1.10q from each side. 1.40q = 4,200

Divide each side by 1.40. 1.40q

______ 1.40

= 4,200

______ 1.40

q = 3,000

The breakeven point occurs when the quantity produced, q, equals 3,000.

CHECK ■ YOUR UNDERSTANDINGFind the breakeven point for the expense function, E = 5.00q + 60,000, and the revenue function, R = 7.00q.

dolla

rs

q

Revenue

7,500Expense

3,000

CHECK YOUR UNDERSTANDINGAnswer Wally’s Widget

World is operating below

the breakeven point;

expenses cost $140 more

than what is made in

revenue.

For more practice, try other

examples using other quan-

tities.

EXAMPLE 5You can give other exam-

ples of simultaneous linear

equations and have the

students solve them graphi-

cally and algebraically, as

review.

CHECK YOUR UNDERSTANDINGAnswer (30,000, 210,000)

Remind students that the

dollar sign should not be

included in the ordered

pair. They should properly

label the axes on their

graphs to understand the

y- coordinate represents a

dollar amount.


1. Interpret the quote according to what you have learned in this chapter.

2. The Gidget Widget Corporation produces widgets. The fi xed expenses are $65,210, and the variable expenses are $4.22 per wid-get. Express the expense function algebraically.

3. A corporation produces mini-widgets. The variable expenses are $1.24 per mini-widget, and the fi xed expenses are $142,900.a. How much does it cost to produce 1 mini-widget? b. How much does it cost to produce 20,000 mini-widgets? c. Express the expense function algebraically. d. What is the slope of the expense function? e. If the slope is interpreted as a rate, give the units that would be

used.

4. The expense function for the Wonder Widget is E = 4.14q + 55,789.a. What is the fi xed cost in the expense function? b. What is the cost of producing 500 Wonder Widgets? c. What is the average cost per widget of producing 500 Wonder

Widgets? Round to the nearest cent. d. What is the total cost of producing 600 Wonder Widgets? e. What is the average cost per widget of producing 600 Wonder

Widgets? Round to the nearest cent. f. As the number of widgets increased from 500 to 600, did the

average expense per widget increase or decrease? g. What is the average cost per widget of producing 10,000 Wonder

Widgets? Round to the nearest cent.

5. The Royal Ranch Pool Supply Corporation manufactures chlorine test kits. The kits have an expense equation of E = 5.15q + 23,500. What is the average cost per kit of producing 3,000 test kits? Round to the nearest cent.

6. The fi xed costs of producing a Wild Widget are $34,000. The variable costs are $5.00 per widget. What is the average cost per widget of producing 7,000 Wild Widgets? Round to the nearest cent.

7. Wanda’s Widgets used market surveys and linear regression to develop a demand function based on the wholesale price. The demand function is q = –140p + 9,000. The expense function is E = 2.00q + 16,000.a. Express the expense function in terms of p. b. At a price of $10.00, how many widgets are demanded? c. How much does it cost to produce the number of widgets from

part b?

An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.

Laurence J. Peter, Professor

Applications


TEACHUnits in AnswersPoint out to students that

correlation coeffi cients have

no units. Always require

them to give answers,

especially answers that are

slopes, with the units. The

more they hear it, read it,

and say it, the more com-

fortable they will be with

using the units. In science

classes, they are encour-

aged/required to give units

in answers.

ANSWERS1. Many variables are

considered when mak-

ing business decisions.

Although economists use

math models to try to

predict what will happen,

a change in any variable

can cause a change in

the expected result.

See margin.

E = 4.22q + 65,210

$142,901.24

$167,700

E = 1.24q + 142,900

1.24

dollars per mini-widget

$55,789

$57,859

$115.72

$58,273

$97.12

decrease

$9.72

$12.98

$9.86

E = –280p + 34,000

7,600

$31,200



8. Wind Up Corporation manufactures widgets. The monthly expense equation is E = 3.20q + 56,000. They plan to sell the widgets to retailers at a wholesale price of $6.00 each. How many widgets must be sold to reach the breakeven point?

9. The Lerneg Corporation computed its monthly expense equation as E = 11.00q + 76,000. Its products will be sold to retailers at a whole-sale price of $20.00 each. How many items must be sold to reach the breakeven point? Round to the nearest integer.

10. Solve Exercise 9 using the graph intersection feature on your graphing calculator. Are the answers equivalent?

11. Variable costs of producing widgets account for the cost of gas required to deliver the widgets to retailers. A widget producer fi nds the average cost of gas per widget. The expense equation was recently adjusted from E = 4.55q + 69,000 to E = 4.98q + 69,000 in response to the increase in gas prices.a. Find the increase in the average cost per widget. b. If the widgets are sold to retailers for $8.00 each, fi nd the

breakeven point prior to the adjustment in the expense function.

c. After the gas increase, the company raised its wholesale cost from $8 to $8.50. Find the breakeven point after the adjustment in the expense function. Round to the nearest integer.

12. Examine the graph of expense and revenue.a. What is the breakeven point? b. If quantity C is sold and C < A, is there

a profi t or a loss? Explain. c. If quantity D is sold and D > A, is there

a profi t or a loss? Explain. d. The y-intercept of the expense function

is Z. Interpret what the company is doing if it operates at the point (0, Z).

13. Billy invented an innovative baseball batting glove he named the Nokee and made his own TV infomercial to sell it. The expense function for the Nokee is E = 6.21q + 125,000. The Nokee sells for $19.95.a. Represent the average expense A for one Nokee algebraically. b. Set your calculator viewing window to show x-values between

0 and 1,000, and y-values from 0 to 2,000. Let x represent q and let y represent A. Graph the average expense function.

c. Is the average expense function linear? d. Is the average expense function increasing or decreasing as

q increases? e. If only one Nokee is produced, what is the average cost per

Nokee to the nearest cent? f. If 100,000 Nokees are produced, what is the average cost per

Nokee to the nearest cent?

14. Lorne has determined the fi xed cost of producing his new invention is N dollars. The variable cost is $10.75 per item. What is the average cost per item of producing W items?

dolla

rs

WZ

qA

R

E

20,000

$0.43

(20,000, 160,000)

(19,602, 166,618)

8,444.

Yes; see margin.

See margin.

$125,006.21

$7.46

TEACHDomains and Breakeven Points Constantly remind students

what the domains before

and after the breakeven

points depict. For visual

learners, this is crucial, and

for non-visual learners, it

may be diffi cult.

ANSWERS10.

12b. There is a loss because

expenses are greater

than revenue at any

quantity less than A.

12c. There is a profi t

because revenue is

greater than expenses

at any quantity greater

than A.

12d. If no items are sold,

the company still has

to pay Z dollars for the

fi xed expenses.

13a. 6.21q + 125.000

_______________ q

13b.

X=8444.4444 Y=168888.89Intersection

(A, W )

See margin.

See margin.

See margin.

See margin.

no

decreasing

10.75W + N

___ W


How can expense and revenue be graphed?The total expense for the production of a certain item is the amount of money it costs to manufacture and place it on the market. One contribu-tor to consumer demand is the price at which an item is sold. Expense relies on the quantity produced and demand relies on price, so the expense function can be written in terms of price.

Recall that revenue is the total amount a company collects from the sale of a product or service. Revenue depends on the demand for a product, which is a function of the price of the product. The relationship between price, demand, expense, and revenue can be better understood when the functions are graphed on a coordinate plane.

Both the demand and expense functions are linear. However, as you will see, revenue is a nonlinear function when it is expressed in terms of price. That is, the graph of the revenue function is not a straight line. The revenue function has a variable raised to an exponent of 2, so it is a second-degree equation and is known as a quadratic equation. A quadratic equation can be written in the form

y = ax2 + bx + c where a, b, and c are real numbers and a ≠ 0

The graph of a qua-dratic equation is called a parabola. In the revenue graph pictured, the horizon-tal axis represents the price of an item, and the vertical axis represents the revenue. If the leading coeffi cient, a, is positive, then the parabola opens upward.

leading coeffi cient• maximum value• vertex of a parabola• axis of symmetry•

Key Termsnonlinear function• second-degree equation• quadratic equation• parabola•

ObjectivesWrite, graph, •

and interpret the

expense function.

Write, graph, •

and interpret the

revenue function.

Identify the points •

of intersection of

the expense and

revenue functions.

Identify breakeven •

points, and

explain them in

the context of the

problem.

Graphs of Expense

and Revenue Functions

2-5

Parabola with a Positive Leading Coefficient


Money often costs too much.Ralph Waldo Emerson, Poet

EXAMINE THE QUESTIONA picture is worth 1,000 words.

The graphs of expense and

revenue equations yield picto-

rial insight into how expense

and revenue interact.

CLASS DISCUSSIONHow does price contribute

to consumer demand?

Name some other factors

that might also play a role

in the quantity of a product

consumers purchase.

Why does a non-vertical

line have slope but a non-

linear function does not?

Students often confuse –ax 2

with (–ax)2. Highlight the

difference and explain how

the absence of parentheses

changes the result.


2-5 Graphs of Expense and Revenue Functions 87

If the leading coeffi cient is negative, then the parabola opens downward. The downward parabola models the revenue function. In the graph, the parabola reaches a maximum value at its peak. This point is the vertex of the parabola and yields the price at which revenue can be maximized.

The axis of symmetry is a vertical line that can be drawn through the vertex of the parabola so that the dissected parts of the parabola are mirror images of each other. The point on the horizontal axis through which the axis of symme-

try passes is determined by calculating – b ___ 2a

.

Parabola with a Negative Leading Coefficient

Maximum

Axis of symmetry


The graphical relationship between revenue and expense reveals much information helpful to a business.

EXAMPLE 1

A particular item in the Picasso Paints product line costs $7.00 each to manufacture. The fi xed costs are $28,000. The demand function is q = –500p + 30,000 where q is the quantity the public will buy given the price, p. Graph the expense function in terms of price on the coordinate plane.

SOLUTION The expense function is E = 7.00q + 28,000. Substitute for q to fi nd the expense function in terms of price.

Expense function. E = 7.00q + 28,000

Substitute. E = 7.00(–500p + 30,000) + 28,000

Use the Distributive property. E = –3,500p + 210,000 + 28,000

Simplify. E = –3,500p + 238,000

The horizontal axis represents price, and the vertical axis represents expense. Both variables must be greater than 0, so the graph is in the fi rst quadrant.

To determine a viewing window, fi nd the points where the expense function intersects the vertical and horizontal axes. Neither p nor E can be 0 because both a price of 0 and an expense of 0 would be mean-ingless in this situation. But, you can use p = 0 and E = 0 to determine an appropriate viewing window.

To fi nd the vertical axis intercept, let p = 0 and solve for E.

E = –3,500p + 238,000Let p = 0. E = –3,500(0) + 238,000

E = 238,000

To fi nd the horizontal axis intercept, let E = 0 and solve for p.

Let E = 0. 0 = –3,500p + 238,000 3,500p = 238,000 p = 68

TEACHReview a parabola and

its related equation. Have

students identify what is

different in this equation

from linear equations.

Discuss how the leading

coeffi cient, in this case the

coeffi cient on the x 2 term,

determines if the parabola

opens upward or down-

ward. Relate this concept

to the leading coeffi cient

of a linear equation, which

is the coeffi cient on the x

term and determines if the

lines go up and to the right

or down and to the right.

In other words, the leading

coeffi cient determines if the

line has a positive slope or

a negative slope.

EXAMPLE 1It is very important that

students understand the

concept of writing a func-

tion in terms of a stated

variable. In Example 1,

they must fi rst construct an

expense function in terms

of the variable q. Then, they

must use the given demand

function and substitute the

expression for q so that the

expense function is now in

terms of the price p. This skill

will be needed throughout

the chapter.



Use the intercepts to deter-mine the size of the viewing window. In order to get a full picture, use window values that are slightly greater than the intercepts. Choose an appropriate scale for each axis. In this case, set the horizontal axis at 0 to 70 with a scale of 10 and the vertical axis at 0 to 240,000 with the scale at 50,000. Enter the function and graph.

CHECK ■ YOUR UNDERSTANDINGAn electronics company manufactures earphones for portable music devices. Each earphone costs $5 to manufacture. Fixed costs are $20,000. The demand function is q = –200p + 40,000. Write the expense function in terms of q and determine a suitable viewing window for that function. Graph the expense function.

EXAMPLE 2

What is the revenue equation for the Picasso Paints product? Write the revenue equation in terms of the price.

SOLUTION Revenue is the product of the price and quantity, or R = pq. The quantity, q, is expressed in terms of the price, so the expression can be substituted into the revenue equation.

Revenue equation R = pq

Substitute. R = p(–500p + 30,000)

Distribute. R = p(–500p) + p(30,000)

Simplify. R = –500p2 + 30,000p

The revenue function is a quadratic equation in the form y = ax2 +bx + c where a = –500, b = 30,000, and c = 0. Because the leading coeffi cient is negative, the graph is a parabola that opens downward.

CHECK ■ YOUR UNDERSTANDINGDetermine the revenue if the price per item is set at $25.00.

EXAMPLE 3

Graph the revenue equation on a coordinate plane.

SOLUTION The graph opens downward. It has a maximum height at the vertex. Here b = 30,000 and a = –500.

–b ___ 2a

= –30,000

________ 2(–500)

= –30,000

________ –1,000

= 30

p68

238,000dollarsCHECK YOUR

UNDERSTANDINGAnswer E = –1,000p +

220,000

Viewing window used:

Xmin = 0 Ymin = 200,000

Xmax = 15 Ymax = 250,000

Xscl = 1 Yscl = 1,000

Students must fi rst create the

expense function in terms

of q; E = 5q + 20,000. Then,

substitute the expression for

q given in the problem state-

ment. This yields an expense

function in terms of the price

p. The horizontal intercept is

220. This can help you select

viewing window values of 0

to 250 with a scale of 50. The

vertical intercept is 220,000.

EXAMPLE 2Students often confuse

revenue and profi t. Empha-

size that revenue is merely

the amount of money that

the sale of an item brings in.

It is therefore a function of

the price of the item and the

quantity sold. Profi t is calcu-

lated taking into account the

costs of making and selling

the item.

CHECK YOUR UNDERSTANDINGAnswer $437,500

This answer can also be

found by determining the

demand at that price and

then multiplying that quan-

tity by $25.

EXAMPLE 3The revenue equation is a

parabola, so students may

need guidance in select-

ing an appropriate viewing

window. Finding the axis

of symmetry and the vertex

will help set the vertical

dimensions.


2-5 Graphs of Expense and Revenue Functions 89

The axis of symmetry passes through 30 on the horizontal axis. To determine the height of the parabola at 30, evaluate the parabola when p = 30.

Revenue equation R = –500p2 + 30,000p

Substitute 30 for p. R = –500(30)2 + 30,000(30)

Simplify. R = 450,000

When the price is set at $30, the maximum revenue is $450,000. The vertical axis must be as high as the maximum value. For the viewing window, use a number slightly greater than the maximum value, such as 500,000, so you can get the entire picture of the graph. Use the same horizontal values on the axis as used for the expense function.

CHECK ■ YOUR UNDERSTANDINGUse the graph in Example 3. Which price would yield the higher revenue, $28 or $40?

EXAMPLE 4

The revenue and expense functions are graphed on the same set of axes. The points of intersection are labeled A and B. Explain what is happening at those two points.

SOLUTION Where the revenue and the expense functions intersect, revenue and expenses are equal. These are breakeven points. Notice there are two such points.

Before intersection point A, the expenses are greater than the revenue. The fi rst breakeven price is approximately at $8.08. The second is approximately at $58.92. From point A to point B, the revenue is greater than the expenses. To the right of point B, the expenses again are greater than the revenue.

p

A

B

dolla

rs

8.08 58.92

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p

dolla

rs maximum

CHECK ■ YOUR UNDERSTANDINGWhy is using the prices of $7.50 and $61.00 not in the best interest of the company?

CHECK YOUR UNDERSTANDINGAnswer Because $28 is

closer to $30 than $40, it

will yield a higher point on

the parabola.

Students could test this

statement by substitution

but should be encouraged to

think through the question

before doing so. The very

structure of a downward

parabola yields a higher

y-value as x approaches the

axis of symmetry.

EXAMPLE 4A and B are points of

intersection. Ask students

what is true about the

y-value in each of the func-

tions when evaluated at the

x-values of points A and B.

Once equality is establish,

discuss what it means for

the y-values to be the same

for both functions at the

points of intersection in

the context of expense and

revenue.

CHECK YOUR UNDERSTANDINGAnswer At both prices,

revenue is less than

expenses. The price of $7.50

is too low for the incom-

ing revenue to make up

for the outgoing expenses.

The price of $61 may be

too high for consumers

and would decrease the

demand for the product.

Therefore, with fewer items

being sold, the revenue will

be less.

49657_02_ch02_p062-113.indd Sec12:8949657_02_ch02_p062-113.indd Sec12:89 5/29/10 3:18:19 PM5/29/10 3:18:19 PM


1. How might the quote apply to what you have learned?

2. Rich and Betsy Cuik started a small business. They manufacture a microwavable coffee-to-go cup called Cuik Cuppa Coffee. It contains spring water and ground coffee beans in a tea-bag-like pouch. Each cup costs the company $1.00 to manufacture. The fi xed costs for this product line are $1,500. Rich and Betsy have determined the demand function to be q = –1,000p + 8,500, where p is the price for each cup.a. Write the expense equation in terms of the demand, q. b. Express the expense equation found in part a in terms of the

price, p. c. Determine a viewing window on a graphing calculator for the

expense function. Justify your answer. d. Draw and label the graph of the expense function. e. Write the revenue function in terms of the price. f. Graph the revenue function in a suitable viewing window. What

price will yield the maximum revenue? What is the revenue at that price? Round both answers to the nearest cent.

g. Graph the revenue and expense functions on the same coordinate plane. Identify the points of intersection using a graphing calcula-tor. Round your answers to the nearest cent. Identify the price at the breakeven points.

3. Orange-U-Happy is an orange-scented cleaning product that is manu-factured in disposable cloth pads. Each box of 100 pads costs $5 to man-ufacture. The fi xed costs for Orange-U-Happy are $40,000. The research development group of the company has determined the demand func-tion to be q = –500p + 20,000, where p is the price for each box.a. Write the expense equation in terms of the demand, q. b. Express the expense function in terms of the price, p. c. Determine a viewing window on a graphing calculator for the

expense function. Justify your answer. d. Draw and label the graph of the expense function. e. Write the revenue function in terms of the price. f. Graph the revenue function in a suitable viewing window. What

price will yield the maximum revenue? What is the revenue at that price? Round answers to the nearest cent.

g. Graph the revenue and expense functions on the same coordi-nate plane. Identify the points of intersection using a graphing calculator, and name the breakeven points. Round to the nearest cent. Identify the price at the breakeven points.

Money often costs too much.Ralph Waldo Emerson, Poet

Applications

TEACHExercises 2 and 3 Students are introduced

to a new product in each

and given information

necessary for creating

an expense function. The

independent variable for

the expense function will

be the quantity, q. Parts a–g

of each question guide the

students through the steps

to graph the functions.

ANSWERS1. Emerson cautions to be

aware of the fact that the

expenses involved in mak-

ing revenue are often more

than the revenue itself.

2c. The intercepts are

(0, 10,000) and (10, 0),

so the viewing window

can be set from 0 to 12

with a scale of 1 for the

horizontal axis and

0 to 12,000 for the

vertical axis with a

scale of 100.

2f. The maximum revenue

of $18,062.50 is achieved

when the price is $4.25;

see additional answers

for graph.

2g. (1.21, 8,794.36) and

(8.29, 1,705.64); $1.21

and $8.29; see additional

answers for graph.

3c. The intercepts are

(0, 140,000) and (56, 0),

so the viewing window

can be set from 0 to 60 for

the horizontal axis with a

scale of 5 and 0 to 150,000

for the vertical axis with a

scale of 10,000.

3f. The maximum revenue

of $200,000 is achieved

when the price is set at

$20.00; see additional

answers for graph.

See margin.

E = 1.00q + 1,500

E = –1,000p + 10,000

See additional answers.

R = –1,000p2 + 8,500p

See margin.

See margin.


R = –500p2 + 20,000p

See margin.

See margin.

E = 5q + 40,000

E = –2,500p + 140,000

See margin.

(7.46, 121,354.02) and

(37.54, 46,145.98)/$7.46 and $37.54; see additional answers for graph.


2-6 Breakeven Analysis 91

What happens when revenue equals expense?When the revenue function is a quadratic equation, you can determine the values at which the expense and revenue functions are equal. Graph the revenue and expense func-tions on the same coordinate plane.

The functions intersect at the values at which the expense and revenue functions are equal (blue points), or the breakeven points. The difference between expense and revenue equals zero, which is a zero net difference.

Notice that the prices on the revenue function between the breakeven points result in revenue greater than expense. Prices beyond the breakeven points result in revenue less than expense. Decision makers must examine the breakeven points carefully to set appropriate prices to yield maximum revenue.

Breakeven points may be found algebraically or by using a graphing calculator. To fi nd breakeven points algebraically, set the expense and revenue functions equal to each other. Rewrite the resulting equation with 0 on one side of the equal sign and all the remaining terms on the other side.

This gives a quadratic equation in the form ax2 + bx + c = 0, where a ≠ 0. The quadratic formula can then be used to solve this quadratic equation. The quadratic formula is

x = –b ± √_______

b 2 – 4ac _____________ 2a

where ± (read plus or minus) indicates the two solutions

x = –b + √________

b 2 – 4ac ______________ 2a

and

x = –b – √________

b 2 – 4ac _____________ 2a

Key Termszero net difference• quadratic formula•

ObjectivesDetermine the •

breakeven prices

and amounts

using technology

or algebra.

500,000

100

price

dollars

0

Breakeven points

Revenue less than expenses

Revenue greater than expenses

Breakeven Analysis 2-6

Risk comes from not knowing what you’re doing.Warren Buffet, Businessman

EXAMINE THE QUESTIONThis lesson examines what

happens at the intersection

of those functions. It might

be helpful if you ask “What

is true about the intersec-

tion of a street and an

avenue?” Elicit responses

that refer to the fact that the

pavement at the intersec-

tion is shared by both the

street and the avenue. Use

this as a springboard for the

discussion about intersec-

tion on graphs.



Breakeven analysis can be used to make product price-setting decisions. Calculation and interpretation must be done during breakeven analysis.

EXAMPLE 1

Determine the prices at the breakeven points for the Picasso Paints product in Lesson 2-5. The expense function is E = –3,500p + 238,000, and the revenue function is R = –500p2 + 30,000p.

SOLUTION The breakeven point occurs when the expense and revenue functions intersect. There are two ways to determine the breakeven point—using technology or algebra.

If a graphing calculator is used, let x represent the price, and express the equations in terms of x. Enter each function into the calculator, and graph them both using a suitable viewing window. Find the intersection points.

Because the calculator will display answers to many decimal places, round the intersection points to the nearest cent. The fi gures below show two graphing calculator screens after the Intersect feature has been used.

Shown below on the left is the leftmost breakeven point; the price is at $8.08.

On the right is the rightmost breakeven point; the price is $58.92.

The breakeven point can also be found algebraically. Set the expense and revenue functions equal to each other. Rewrite the resulting equation with 0 on one side and all the remaining terms on the other side. The quadratic equation is usually written with the leading coeffi cient positive.

E = R

Set the expressions equal. –3,500p + 238,000 = –500p 2 + 30,000p

Rewrite to set equal to 0. +500p2 – 30,000p = +500p2 – 30,000p

500p2 – 33,500p + 238,000 = 0

In the quadratic equation 500p2 – 33,500p + 238,000 = 0, a = 500, b = –33,500, and c = 238,000. Because the equation is written in terms of p, use p instead of x in the quadratic formula. Substitute values for a, b, and c, and calculate.




CLASS DISCUSSIONWhy wouldn’t a company

set the price of an item at

the breakeven point price?

Are there always two

breakeven points? Could

there be a situation where

there are more than two?

Less than two?

Ask students to describe

situations where a graph

might also be a quadratic.

What are you fi nding when

you solve a quadratic

equation?

TEACHUse the labeled graph

from page 91 to be certain

students can interpret these

graphs when they create

them in this lesson.

If your students do not

remember the quadratic

formula and want to know

where it comes from, show

the process of fi nding solu-

tions by completing the

square for the equation

y = ax 2 + bx + c.

EXAMPLE 1Make sure that students

are comfortable with both

methods of fi nding the

breakeven points. Discuss

the role that rounding

plays in creating a pos-

sible discrepancy in the

vertical axis values at the

breakeven points. Some

students might fi nd the

quadratic formula more

accessible if it is stated as

x = − b ___ 2a

±

√________

b 2 − 4ac _________

2a . Here,

students can see that the

same amount is added to

and subtracted from the

axis of symmetry x-value,

yielding roots that are sym-

metrical with respect to the

axis of symmetry.



Quadratic formula x = –b ± √________

b 2 – 4ac ______________ 2a

Use + in the formula.

p = –(–33,500) + √

___________________________ (–33,500) 2 – 4(500)(238,000) _________________________________________

2(500) ≈ 58.92

Use – in the formula.

p = –(–33,500) – √

___________________________ (–33,500) 2 – 4(500)(238,000) ________________________________________

2(500) ≈ 8.08

The prices at the breakeven points are $8.08 and $58.92.

CHECK ■ YOUR UNDERSTANDINGThe expense function for a particular product is E = –2,000p + 125,000. The revenue function for that product is R = –600p2 + 18,000p. Determine the prices at the breakeven points for this product both algebraically and graphically.

EXTEND ■ YOUR UNDERSTANDINGKnowing that the two breakeven prices have been rounded to the nearest cent, what would you expect when each is substituted into the expense and revenue equations?

EXAMPLE 2

Determine the revenue and expense for the Picasso Paints product at the breakeven points found in Example 1.

SOLUTION The y-value of the breakeven point will be both the rev-enue and expense values. These values can be determined by substitut-ing the values of p into the expense and revenue equations.

Substitute 8.08 for p. E = –3,500(8.08) + 238,000 = 209,720

R = –500(8.08)2 + 30,000(8.08) = 209,756.80

Substitute 58.92 for p. E = –3,500(58.92) + 238,000 = 31,780

R = –500(58.92)2 + 30,000(58.92) = 31,816.80

When the breakeven price is approximately $8.08, the expense and revenue values are each close to $209,750.

When the breakeven price is approximately $58.92, the expense and revenue values are each approximately $31,800.

Because of rounding, the expense and revenue are not equivalent. They are, however, approximately equal.

CHECK ■ YOUR UNDERSTANDINGHow could you have improved on the error when calculating the expense and revenue values?

CHECK YOUR UNDERSTANDINGAnswer The breakeven

prices using both the qua-

dratic formula method and

the graphing calculator are

$8.33 and $25. The former

has been rounded to two

decimal places.

EXTEND YOUR UNDERSTANDINGAnswer The actual

breakeven values have

non-terminating decimal

parts, so using the rounded

values will not yield exact

expense and revenue

values. The expense and

revenue values are approxi-

mately equal when

p = 8.08 and p = 58.92.

EXAMPLE 2Example 2 follows from the

discussion in Extend Your

Understanding. Notice that

the expense and revenue

values are approximately

equal due to rounding.

CHECK YOUR UNDERSTANDINGAnswer The error could

have been improved by

using more accurate prices

with more decimal places in

the calculation. But, for this

purpose, it is acceptable to

round to the nearest cent.



EXAMPLE 3

Use a spreadsheet to determine the breakeven price for the Picasso Paints product.

SOLUTION Develop general expense and revenue equations so the spreadsheet can calculate the breakeven prices regardless of the situations. The expense function is E = Vp + F, where p equals price, V equals vari-able costs, and F equals fi xed costs. The revenue function is R = Ap2 + Bp where p equals price and A and B are values specifi c to the particular situ-ation. Set the expense equation equal to the revenue equation.

E = RSubtract Vp + F from both sides. Vp + F = Ap2 + Bp –Vp – F = –Vp – F 0 = Ap2 + Bp – Vp – FCombine like terms. 0 = Ap2 + ( B – V ) p – F

This is a quadratic equation where a = A, b = (B – V), and c = –F. Depend-ing on the spreadsheet software, cell formulas may vary. The Picasso Paints functions are E = –3,500p + 238,000 and R = –500p2 + 30,000.

The values of V and F from the expense function are entered into cells B3 and B4. The values of A and B from the revenue function are entered into cells B7 and B8. Cells B15 and B16 are the breakeven prices calculated using the quadratic formula.

For B15 the formula is =(–B12+SQRT(B12ˆ2–4*B11*B13))/(2*B11). For B16 the formula is =(–B12–SQRT(B12ˆ2–4*B11*B13))/(2*B11).

A B

1 Breakeven Calculator

2 The expense equation has the form Vp + F. –3,500p + 238,000

3 Enter the value of V in cell B3. –3,500

4 Enter the value of F in cell B4. 238,000

5

6 The revenue equation has the form Ap 2 + Bp. –500p 2 + 30,000p

7 Enter the value of A in cell B7. –500

8 Enter the value of B in cell B8. 30,000

910 Solve the quadratic equation. –500p 2 + 33,500p +

–238,000

11 where a = –500

12 b = 33,500

13 c = –238,000

1415 The price at the fi rst breakeven point is $8.08

16 The price at the second breakeven point is $58.92

CHECK ■ YOUR UNDERSTANDINGWhat cell formulas were used to identify the a, b, and c values shown in B11, B12, and B13?

EXAMPLE 3Carefully walk the students

through the solution as

stated here. Without a

good understanding of the

algebraic manipulations,

students will not be able

to create the spreadsheet

formulas. Impress upon

students that there are

other acceptable correct

solutions in spreadsheet

form that will yield the

same result.

CHECK YOUR UNDERSTANDINGAnswer Because the value

in B11 is the same as the

value in B7, the formula in

B11 is =B7. The value in B12

is the difference between

B and V. Therefore, the for-

mula in B12 is =(B8–B3). The

value in B13 is the negative

value in B4. The formula in

B13 is =–B4.

If you want to stress to stu-

dents that they are taking

the opposite of the value

in B4, you can have them

write the formula for B13

as =–1*B4.



1. How might the quote apply to what you have learned?

2. A manufacturer has determined that the combined fi xed and variable expenses for the production and sale of 500,000 items are $10,000,000. What is the price at the breakeven point for this item?

3. A supplier of school kits has determined that the combined fi xed and variable expenses to market and sell G kits is W. a. What expression models the price of a school kit at the

breakeven point? b. Suppose a new marketing manager joined the company and

determined that the combined fi xed and variable expenses would only be 80% of the cost if the supplier sold twice as many kits. Write an expression for the price of a kit at the breakeven point using the new marketing manager’s business model.

4. A jewelry manufacturer has determined the expense equation for necklaces to be E = 1,250q + 800,000, where q is the quantity demanded. At a particular price, the breakeven revenue is $2,600,000. a. What is the quantity demanded at the breakeven point? b. If the breakeven revenue changes to 3.5 million, will the quan-

tity demanded have increased or decreased? Explain.

5. A manufacturer determines that a product will reach the breakeven point if sold at either $80 or $150. At $80, the expense and revenue values are both $300,000. At $150, the expense and revenue values are both $100,000.

On graph paper, graph possible revenue and expense functions that depict this situation. Circle the breakeven points.

6. iSports is considering producing a line of baseball caps with wire-less cellphone earpieces attached. The breakeven point occurs when the price of a cap is $170 or $350. At $170, the expense and revenue values are both $2,600,000. At $350, the expense and revenue values are both $900,000. On graph paper, graph possible revenue and expense functions that depict this situation. Circle the breakeven points.

7. SeaShade produces beach umbrellas. The expense function is E = –19,000p + 6,300,000 and the revenue function is R = –1,000p2 + 155,000p. a. Graph the expense and revenue functions. Label the maximum

and minimum values for each axis. Circle the breakeven points.b. Determine the prices at the breakeven points. c. Determine the revenue and expense amounts for each of the

breakeven points.

Risk comes from not knowing what you’re doing.Warren Buffet, Businessman

Applications

See margin.

$20

TEACHExercises 2 and 3 These questions are related

and should be assigned

together. Exercise 2 offers

a purely numerical situa-

tion and Exercise 3 offers a

related algebraic situation.

Exercises 5 and 6 These questions offer

students numerical infor-

mation about the relation-

ship between revenue and

expense. They are asked to

use this data (rather than

equations) to sketch graphs.

ANSWERS1. Warren Buffet speaks to

the need to be knowl-

edgeable in order to

minimize or eliminate

risk. With the knowl-

edge of the prices and

subsequent revenue at

breakeven points, the

risk of putting a product

on the market can be

minimized.

4b. Increased; substitute

3,500,000 into the

expense equation.

When you solve for p,

the solution is 2,160,

which is greater than

1,440.

7b. $51.38 and $122.62

7c. When p = $51.38,

E = $5,323,780.00 and

R = $5,323,995.60.

When p = $122.62,

E = $3,970,220.00 and

R = $3,970,435.60.

G

___ W

2G _____

0.8W

1,440 necklaces


See margin.

Answers vary.

Answers vary.

See margin.

See margin.



8. Where-R-U produces global positioning systems (GPS) that can be used in a car. The expense equation is E = –5,000p + $8,300,000, and the revenue equation is R = –100p2 + 55,500p.a. Graph the expense and revenue functions. Circle the breakeven

points. b. Determine the prices at the breakeven points. Round to the near-

est cent. c. Determine the revenue and expense amounts for each of the

breakeven points. Round to the nearest cent.

9. The student government at State College is selling inexpensive bookcases for dorm rooms to raise money for school activities. The expense function is E = –200p + 10,000 and the revenue function is R = –18p2 + 800p.a. At what price would the maximum revenue be reached? What would

that maximum revenue be? Round to the nearest cent. b. Graph the expense and revenue functions. Circle the breakeven

points. c. Determine the prices at the breakeven points. Round to the near-

est cent. d. Determine the revenue and expense amounts for each of the


10. An electronics store is selling car chargers for cell phones. The expense function is E = –300p + 13,000 and the revenue function is R = –32p2 + 1,200p.a. At what price would the maximum revenue be reached? b. What would that maximum revenue be? Round to the nearest

cent. c. Graph the expense and revenue functions. Circle the breakeven

points. d. Determine the prices at the breakeven points. Round to the near-

est cent. e. Determine the revenue and expense amounts for each of the


Use the graph to answer Exercises 11–14.

11. At what price is the maximum profi t reached?

12. What are the breakeven prices?

13. Name two prices where the revenue is greater than the expenses.

14. Name two prices where the revenue is less than the expenses.

100,000

200

price

dollars

0

$210.27 and $394.73

See margin.

E = 7,384.00 and R = 7,384.44. When p = 42.48, E = 1,504.00 and R = 1,502.09.

$11,250


See margin.


$13.08 and $42.48

When p = 13.08,

When p = 11.48,E = 9,556.00 and R = 9,558.71. When p = 35.40, E = 2,380.00 and R = 2,378.88.

TEACHExercises 9 and 10 These questions are similar

in structure and intent.

Perhaps assign Exercise 9

to half the class and Exer-

cise 10 to the other half.

Have students from each

group present the solutions

to the other group.

ANSWERS8c. When p = $210.27,

E = $7,248,650.00 and

R = $7,248,637.71.

When p = $394.73,

E = $6,326,350.00 and

R = $6,326,337.71

9a. If the bookcase is set at

$22.22 then the maxi-

mum revenue would

be approximately

$8,888.89.

10c. When p = $11.48,

E = $9,556.00 and

R = $9,558.71.

When p = $35.40,

E = $2,380.00 and

R = $2,378.88. See

additional answers for

graph.

$11.48 and $35.40

$70,000

$40 and $80

Sample answers: $45 and $50

Sample answers: $35 and $150

See margin.

$18.75


2-7 The Profit Equation 97

How do revenue and expenses contribute to profit calculation?In the business world, two companies may produce and sell the same product. It is possible that both companies will have the same maximum revenue based on their individual revenue functions. However, other aspects of production may not be identical.

Revenue is the amount of money a company makes from the sale of goods or services. While the maximum revenue may be the same for each product, the revenue and expense equations may be different. Figure A displays the graph of the revenue function for the product. Figure B dis-plays the graph of the revenue function of a similar product produced by a different company. The graphs of the revenue functions yield the same maximum values but model different situations.

Figures C and D depict the same revenue functions but different expense functions. Figure C shows an expense function that is always greater than the revenue graph. Therefore, the company makes no money on the manufacture and sale of the product. The company can-not even reach a breakeven point because there are no breakeven points. In Figure D, the expense function is greater than the revenue function at certain prices, but there are also prices at which the opposite is true. A company would prefer Figure D to model the sale of its product because there are prices at which money coming in is greater than money spent. The money a company makes after expenses have been deducted from revenue is profi t. In Figure D, there are prices at which the company will make a profi t. In Figure C, no matter the price, the rev-enue is never enough to offset the expenses.

Key Termsprofi t • maximum profi t•

ObjectivesDetermine a profi t •

equation given

the expense

and revenue

equations.

Determine the •

maximum profi t

and the price

at which that

maximum is

attained.

The Profi t Equation 2-7

Figure A Figure B Figure C Figure D

500,000

70

price

dollars

0

500,000

70

price

dollars

070

0

500,000

price

dollars500,000

70

price

dollars

0

Nobody ever lost money taking a profi t.Bernard Baruch, Businessman

EXAMINE THE QUESTIONStudents have now explored

the algebraic and graphi-

cal relationships between

expense and revenue.

This chapter is about profi t

and what factors contribute

to profi t. Ask students for

their defi nition of profi t.

Then, ask them how rev-

enue and expense contrib-

ute to profi t. Their response

will pave the way for the

lesson and act as a fi rst-step

in answering the opening

question.



Graphically, profi t is the vertical distance between the revenue and expense functions. In Figure E, the top of the vertical line segment (in purple) hits the revenue graph at $437,500 when the price is about $25.

The bottom of the vertical line segment hits the expense graph at $150,500 at the same price. The verti-cal length of this segment is 437,500 – 150,500 = 287,000 and is the profi t the company makes when the price is about $25.

P = R – E where P is profi t, R is revenue, and E is expenses

In Figure F, several profi t line segments have been drawn for different prices. The longest seg-ment would represent the great-est difference between revenue and expense at a given price. The greatest difference between revenue and expense denotes maximum profi t.

It is diffi cult to make a visual determination as to where the maximum profi t line might be drawn. Algebra and graphing must be used to make a more pre-cise determination.

500,000

70price

dollars

0

Figure E

500,000

70price

dollars

0

Figure F

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FR

OM

SH

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TE

RS

TO

CK

.CO

M

CLASS DISCUSSIONAsk students for the names

of different companies that

produce the same product.

Then, ask what aspects of

the production might not be

identical among the

companies.

Describe a graph and a situ-

ation in which there is only

one breakeven point. What

does it mean for production

and sales?

Have students examine the

graph. Ask them to iden-

tify three different prices

at which profi t would be a

small, medium, and large

amount (not necessarily the

maximum).



The revenue and expense functions are both functions of price, p, so, you can create a profi t function in terms of p.

EXAMPLE 1

Determine the profi t equation for the Picasso Paints product in Lesson 2-5. The revenue and expense functions were

R = –500p2 + 30,000pE = –3,500p + 238,000

SOLUTION Profi t is the difference between revenue and expense.

P = R – E

Substitute for R and E. P = –500p2 + 30,000p – (–3,500p + 238,000)

Distribute. P = –500p2 + 30,000p + 3,500p – 238,000

Combine like terms. P = –500p2 + 33,500p – 238,000

The profi t equation is P = –500p2 + 33,500p – 238,000. It is a down-ward parabola because the leading coeffi cient is negative.

CHECK ■ YOUR UNDERSTANDINGSuppose that the revenue and expense functions are R = –350p2 + 18,000p and E = –1,500p + 199,000. Write the profi t equation.

EXAMPLE 2

Use a graphing calculator to draw the graph of the profi t equation from Example 1. What is the maximum profi t?

SOLUTION Enter the profi t equation P = –500p2 +33,500p – 238,000 into a graphing calculator. Use the same viewing window you used for the graphs of the revenue and expense functions in Lesson 2-5. The maximum profi t is at the vertex of the parabola. Graphing calculators have a maximum feature that determines the value of the maximum point of a function. Let x represent the price, p. The maximum is 323,125 when x = 33.50.

CHECK ■ YOUR UNDERSTANDINGSketch the graph. Identify the points where zero profi t is made. Explain your reasoning.


500,000

70

price

dollars

0

Maximum profit

TEACHBefore you begin Example 1,

choose a product that

students can relate to such

as cell phones. Name two

different companies that

manufacture cell phones and

have students describe the

differences in Figures A–D

on page 97 by relating them

to the cell phones and their

manufacturers.

EXAMPLE 1Perhaps the most com-

mon error students make

when generating the profi t

equation is the failure to

distribute the subtraction

over both terms in the

expense expression. Make

sure that you alert them to

the importance of this part

of the computation.

CHECK YOUR UNDERSTANDINGAnswer P = R – E

P = –350p2 + 19,500p –

199,000

EXAMPLE 2Replace the variable p with

x and P with Y.

CHECK YOUR UNDERSTANDINGAnswer The two points

where the profi t function

intercepts the horizontal axis

indicate item prices at which

no profi t is made. These

prices are $8.07 and $58.93.



EXAMPLE 3

Graph the revenue, expense, and profi t functions on the same coordi-nate plane. Interpret the zero-profi t points, the maximum profi t, and how the functions relate to each other.

SOLUTION The maximum profi t is at the vertex of the profi t graph. The price at this point yields the greatest difference between the rev-enue and expense functions. There are two zero-profi t points on the graph of the profi t function. No profi t is made at the selling price where expense is equal to revenue. Visually, this is the price at which the revenue and expense functions intersect.

Expenses

Revenue

Profit

Zero profit

Maximum profit

CHECK ■ YOUR UNDERSTANDINGMust maximum profi t occur at the same price as the maximum revenue?

EXAMPLE 4

Algebraically, determine the price of the Picasso Paints product that yields the maximum profi t.

SOLUTION To determine the maximum profi t algebraically, recall that the maximum value occurs on the axis of symmetry. For the profi t function P = –500x2 + 33,500x – 238,000, a = –500, b = 33,500, and c = –238,000. The x- intercept of the axis of symmetry is determined

by calculating – b___2a

.

–b ___ 2a

= –33,500

________ 2 (–500)

= –33,500

________ –1,000

= 33.5

The axis of symmetry intercepts the horizontal axis at 33.5. To determine the height of the parabola at 33.5, evaluate the function when p = 33.5.

Quadratic equation P = –500p2 + 33,500p – 238,000

Substitute 33.5 for p. P = –500(33.5)2 + 33,500(33.5) – 238,000

Simplify. P = 323,125

At $33.50, a maximum profi t of $323,125 is attained.

CHECK ■ YOUR UNDERSTANDINGUse the profi t function from Example 1 Check Your Understanding. Determine the price to the nearest cent that yields the maximum profi t.

EXAMPLE 3Students should maintain

the same viewing win-

dow and all three graphs

should be pictured in this

window. Walk the students

through each of the points

mentioned in the problem

statement and ask them to

interpret the situation that

is modeled at those points.

CHECK YOUR UNDERSTANDINGAnswer No; the greatest

difference between rev-

enue and expense does not

depend on the maximum

revenue.

You might wish to use

a ruler to show that the

maximum revenue distance

and the maximum profi t

are more than likely not the

same.

EXAMPLE 4To solve this problem

algebraically, students need

to fi rst determine the profi t

quadratic and put it in stan-

dard form. Discuss where

the maximum of a parabola

always occurs (horizontal

value is the axis of sym-

metry). Then, lead them

through to the calculation

of that maximum point.

Although the question asks

for the price at which the

profi t is a maximum, the

solution shows students

how to use that price to

determine the maximum

profi t.

CHECK YOUR UNDERSTANDINGAnswer Using P = –350p2 +

19,500p – 199,000, a maxi-

mum profi t of $72,607.14 is

attained at a price of $27.86.



1. How might the quote apply to what has been outlined in this lesson?

Examine each of the graphs in Exercises 2–5. In each case, the blue graph represents the expense function and the black graph represents the revenue function. Describe the profi t situation in terms of the expense and revenue functions.

2. 3.

In Exercises 6–9, write the profi t function for the given expense and revenue functions.

6. E = –20,000p + 90,000R = –2,170p2 + 87,000p

7. E = –6,500p + 300,000 R = –720p2 + 19,000p

8. E = –2,500p + 80,000 R = –330p2 + 9,000p

9. E = –12,500p + 78,000 R = –1,450p2 + 55,000p

Nobody ever lost money taking a profi t.Bernard Baruch, Businessman

Applications

$100,000

100

price

dollars

0

$100,000

100

price

dollars

0

$100,000

100

price

dollars

0

$100,000

100

price

dollars

0

4. 5.

P = –2,170p2 + 107,000p – 90,000

P = –720p2 + 25,500p – 300,000

P = –330p2 + 11,500p – 80,000

P = –1,450p2 + 67,500p – 78,000

ANSWERS1. A person would lose

money when the

expense is greater than

the revenue. A true profi t

equation is found in the

fi rst quadrant and is

the difference between

the revenue and the

expense. If the expense is

greater than the revenue,

then there is no profi t.

Therefore, no one would

lose money if they take

(make) a profi t!

2. The expenses are

fi xed for this product.

Regardless of price, the

expenses are $500,000. A

profi t is made when the

price is set approximately

between $20 and $60.

3. This situation is similar

to that examined in Skills

and Strategies. Expenses

decrease as the price of

the item increases. Profi t

is made when the price

is set approximately

between $13 and $70.

4. The expenses are

greater than the revenue

at all possible prices. No

profi t can be made from

the sale of this item.

5. This situation is similar

to that examined in Skills

and Strategies. Expenses

decrease as the price of

the item increases. Profi t

is made when the price

is set approximately

between $7 and $18.

See margin.

See margin.



800,000

50price

dollars

0

10. Examine the revenue (black) and expense (blue) func-tions. Estimate the price at the maximum profi t. Explain your reasoning.

11. The expense and revenue func-tions yield a profi t function, but the equation can represent no profi t made for any price. One of the profi t functions in Exercises 6–9 models such a situation.a. Determine which profi t function models a no profi t situation. b. What does a profi t function look like when no profi t can

be made?

12. Determine the maximum profi t and the price that would yield the maximum profi t for each. a. P = –400p2 + 12,400p – 50,000 b. P = –370p2 + 8,800p – 25,000 c. P = –170p2 + 88,800p – 55,000

13. Greenyard’s manufactures and sells yard furniture made out of recy-cled materials. It is considering making a lawn chair from recycled aluminum and fabric products. The expense and revenue functions are E = –1,850p + 800,000 and R = –100p2 + 20,000p.a. Determine the profi t function. b. Determine the price, to the nearest cent, that yields the maxi-

mum profi t. c. Determine the maximum profi t, to the nearest cent.

14. Mountaineer Products Incorporated manufactures mountain-bike accessories. It is considering making a new type of refl ector for night biking. The expense and revenue functions are E = –450p + 90,000 and R = –185p2 + 9,000p.a. Determine the profi t function. b. Determine the price, to the nearest cent, that yields the maxi-


15. Business Bargains manufactures offi ce supplies. It is considering sell-ing sticky-notes in the shape of the state in which they will be sold. The expense and revenue functions are E = –250p + 50,000 and R = –225p2 + 7,200p.a. Determine the profi t function. b. Determine the price, to the nearest cent, that yields the maxi-


16. FlipFlops manufactures beach sandals. Their expense and revenue functions are E = –300p + 32,000 and R = –275p2 + 6,500p.a. Determine the profi t function. b. Determine the price, to the nearest cent, that yields the maxi-


will lie entirely below the horizontal axis.

TEACHExercise 12Encourage students to

attempt at least one of

these problems in two

different ways (graphically

and algebraically).

Exercises 13–16These questions are similar

in intent. You might want to

randomly assign two prob-

lems to each student so

that when reviewing them

the next day, students can

listen to their peers explain

the individual work that was

done.

ANSWERS10. Approximately $26;

it appears to have the

greatest positive verti-

cal distance from the

revenue to the expense

function.

11a. In Exercise 7 the

expenses are always

greater than the rev-

enue.

12a. At $15.50, the

maximum profi t

would be $46,100.

12b. At $11.89, the

maximum profi t

would be $27,324.35.

12c. At $261.18, the

maximum profi t

would be

$11,541,235.29.

See margin.

If expenses are always greater than the revenue, the profi t parabola

P = –100p2 + 21,850p – 800,000

$109.25

$393,556.25

P = –185p2 + 9,450p – 90,000

$25.54

$30,679.05

P = –225p2 + 7,450p – 50,000

$16.56

P = –275p2 + 6,800p – 32,000

$12.36

$10,036.36

$11,669.44

See margin.

See margin.


2-8 Mathematically Modeling a Business 103

How can you mathematically model a start-up business?Statistics are necessary in making business decisions. The relation-ship between supply and demand; expense, revenue, and profi t; and breakeven points must be analyzed. All of the factors may be modeled together to assess business situations.

Dependence is used in many contexts.In sports, baseball fans • depend on the manager of the team to lead the team to victory. In turn, the manager of the team depends on the players to work hard to succeed.In politics, voters • depend on their local elected offi cials to represent them. Local elected offi cials depend on state government offi cials to give them the support they need to represent the voters.When starting a business venture, expenses • depend on the demanded quantity of the product. Demand depends on the price of the product.These are a few examples of dependence in daily life. In the fi rst

example, if the fans depend on the manager and the manager depends on the players, the fans depend on the players as well. In the second example, if the voters depend on the local elected offi cials and the local offi cials depend on the state offi cials, the voters depend upon the state offi cials, too. Finally, in the last example, if expenses depend on quantity and quantity depends on price, expenses also depend on price. These are examples of the transitive property of dependence.

If x depends on y and y depends on z, it follows that x depends on z.The determination of the price that yields the maximum profi t

depends on a number of factors that precede it. Mathematical model-ing using algebra is an illustration of the use of the transitive property in business.

Key Termsdependence• transitive property of dependence•

ObjectivesRecognize •

the transitive

property of

dependence as

it is used in a

business model.

Use multiple •

pieces of

information,

equations, and

methodologies

to model a new

business.

Mathematically Modeling

a Business

2-8

All models are wrong. Some models are useful.George Box, Statistician and Quality Control Pioneer

EXAMINE THE QUESTIONIn order for this question

to make sense, students

need a good understand-

ing of what a mathematical

model is and when those

models are used. Discuss

some situations where real

life situations are modeled

mathematically in order to

gain information that would

otherwise be diffi cult to

attain.

CLASS DISCUSSIONName other situations that

illustrate dependence.

Have students use the

situations identifi ed in

previous discussions and

illustrate how they might be

examples of the transitive

property of dependence.



Mathematically modeling a business situation helps you better under-stand the relationships between and among variables.

EXAMPLE 1

Determine the expense, E, for production of an item when the price, p, is $60 given E = 50q + 80,000 and q = 80p + 100,000.

SOLUTION E depends on q, and q depends on p. To fi nd the value of E at a particular price, p, use substitution or express the expense equa-tion directly in terms of price. Both methods illustrate the transitive property of dependence.

The fi rst method uses the price given to fi nd a value for q that can be substituted into the equation for E.

Method 1

Use the equation for q. q = 80p + 100,000

Substitute 60 for p. q = 80(60) + 100,000

Simplify. q = 104,800

Use the equation for E. E = 50q + 80,000

Substitute 104,800 for q. E = 50(104,800) + 80,000

Simplify. E = 5,320,000

The second method substitutes the value of q in terms of p into the expense equation, and then uses the price given to fi nd the value of E.

Method 2

Use the equation for E. E = 50q + 80,000

Substitute 80p + 100,000 for q. E = 50(80p + 100,000) + 80,000

Distribute. E = 4,000p + 5,000,000 + 80,000

Calculate. E = 4,000p + 5,080,000

Substitute 60 for p. E = 4,000(60) + 5,080,000

Simplify. E = 5,320,000

The expenses total $5,320,000.

CHECK ■ YOUR UNDERSTANDINGDetermine the expense, E, for production of an item when the price, p, is $42 given E= 50q + 80,000 and q = 80p + 100,000.

EXTEND ■ YOUR UNDERSTANDINGSuppose A = 20x + 30, x = 30y + 40, and y = 40z + 50. Describe how the value of A depends on the value of z.

Skills and StrategiesTEACHDiscuss with students how

the models in this lesson

differ from models used

in math courses in earlier

grades and how they are

the same. Students will

likely remember using mod-

els such as algebra tiles,

fraction bars, and three-

dimensional models of

geometric solids. They will

not, however, usually think

of graphing on a coordinate

plane or writing and solving

an equation as a model.

Guide students to see that

the fundamental use of a

model is the same, whether

it is an equation or a cube.

EXAMPLE 1It is important to work

through both methods with

students so that they can

see the nature of math-

ematical dependency in this

situation.

CHECK YOUR UNDERSTANDINGAnswer Using either

method, the expense is

$5,248,000.

EXTEND YOUR UNDERSTANDINGAnswer Once the value

of z is known, then y

can be calculated. With

y calculated, then x can

be determined. Once x is

determined, it is substituted

into the fi rst equation, and

A can be evaluated.



EXAMPLE 2

A business model uses a summary analysis of the situation in terms of dependent variables. Examine the three graphs of a business sit-uation for the production of wid-gets. The graphs depict numerical information that is needed to complete the summary analysis.

Write the summary analysis in terms of the data presented in the graphs. The summary analysis should have the following format.

In summary, to start this busi-ness, __?__ widgets should be manufactured. Each should be sold for $__?__.

The breakeven point is reached at a price of $__?__ or $__?__, but a profi t is made at any price between those prices.

At the selling price, there is revenue of $__?__ and expenses of $__?__, resulting in a profi t of $__?__.

SOLUTION In summary, to start this business, 103,200 wid-gets should be manufactured. Each should be sold for $40.

The breakeven point is reached at a price of $14.83 or $65.17, but a profi t is made at any price between those prices.

At the selling price, there is revenue of $800,000 and expenses of $420,000, resulting in a profi t of $380,000.

150,000

200

price

demand

0

Demand

(40, 103,200)

900,000

100

price

amount

0

Expense

(36.57, $806,666.67)

Revenue

(40, $420,000)

(14.83, 520,664.46)

(65.17, $319,335.54)

(40, $800,000)

CHECK ■ YOUR UNDERSTANDINGUse the points labeled on the graphs to show that the maximum profi t at the selling price is the difference between the revenue and expense values at that price.

900,000

100

price

profit

0

Profit

(40, 380,000)

These amounts can be found at the

intersection points of the expense

and revenue functions.

This is asking the price that will yield

the maximum profi t and the quantity

demanded at that price.

Use the price that yields the maximum profi t, $40, in both the expense and

profi t functions.

EXAMPLE 2Students may need assis-

tance with this activity in

determining what type of

information each graph

yields. Before attempting

a solution, ask students to

examine each graph and

determine what information

can be gained from it.

CHECK YOUR UNDERSTANDINGAnswer The maximum

point on the profi t func-

tion is (40, $380,000).

The expense at a price of

$40 is $420,000, and the

revenue at a price of $40 is

$800,000.

800,000 – 420,000 = 380,000


1. How might those words apply to what has been outlined in this lesson?

2. Use the following graph to answer the questions below. Let Y1 = cost function and Y2 = revenue function.

a. Explain the signifi cance of point (D, B). b. Explain the signifi cance of point (E, A). c. Explain the signifi cance of point (F, C). d. Explain the signifi cance of point (G, 0). e. Explain the signifi cance of point (H, 0).

f. Where do you think the maximum profi t might occur?

3. Draw a graph of cost function Y1 and revenue function Y2 that meet the following criteria. Maximum revenue: $125,000 Breakeven points: $40 and $160 Price at which no revenue is made: $200 Maximum expenses: $105,000

Use the following situation to answer Exercises 4–20. A company produces a security device known as Toejack. Toejack is a computer chip that parents attach between the toes of a child, so parents can track the child’s location at any time using an online system. The company has entered into an agreement with an Internet service pro-vider, so the price of the chip will be low. Set up a demand function—a schedule of how many Toejacks would be demanded by the public at dif-ferent prices.

4. As the price increases, what is expected to happen to the quantity demanded?

5. The horizontal axis represents price, and the vertical axis represents quantity. Does the demand function have a positive or negative slope? Explain.

All models are wrong. Some models are useful.George Box, Statistician and Quality Control Pioneer

Applications

0D E F G H

AB

C


TEACHExercise 2This question is a prerequi-

site for all of the exercises

to follow. It is very impor-

tant that students have an

understanding of the points

identifi ed on the graphs and

what those points represent

in the context of a start-up

business. You might want to

do this problem in class as a

closure piece for the lesson.

ANSWERS1. Models simulate reality

but they themselves are

not reality. There are a

fi xed number of variables

that are used in models.

In reality, there are many

more variables that con-

tribute to the outcome

of a situation. So, while

models can be wrong,

they can still be useful.

2f. The maximum profi t

occurs where there is the

greatest vertical difference

between the revenue and

expenses functions. It

appears that this might

happen at an x value

slightly to the left of E.

3.

It is the fi rst breakeven point.

It is the maximum revenue point.

It is the second breakeven point.

It represents the price at which

It represents the price at whichno revenue is made.

there are no expenses.

0$100 $200

$125,000$105,000

$160

$40

See margin.

The demand is decreasing; the slope is negative.

See margin.

See margin.

decreases



6. The company decides to conduct a market research survey to deter-mine the best price for the device. The variable p represents price, and q represents quantity demanded. The points are listed as (p, q).

(14, 8,200), (11, 9,100), (16, 7,750), (16, 8,300), (14, 8,900),(17, 7,100), (13, 8,955), (11, 9,875), (11, 9,425), (18, 5,825)

Make a scatterplot of the data. Does the data look like it has a linear form?

7. Find the regression equation. Remember the quantity demanded, q, is the dependent variable. Round the slope and y–intercept to the nearest hundredth.

8. Is the linear regression line a good predictor? Explain.

9. Examine the data to see if there is any relationship between the price and the quantity demanded. Determine the correlation coeffi cient between price and demand, rounded to nearest hundredth. Explain the signifi cance of the correlation coeffi cient.

10. Fixed costs are $24,500, and variable costs are $6.12 per Toejack. Express expenses, E, as a function of q, the quantity produced.

11. Express the revenue, R, in terms of p and q.

12. Express the revenue, R, in terms of p.

13. Use the transitive property of dependence to express expense, E, in terms of p. Round to the nearest hundredth.

14. Graph the expense and revenue functions.a. Determine an appropriate maximum horizontal-axis value. b. Determine an appropriate maximum vertical-axis value. c. Sketch the graphs of the expense and revenue functions.

15. Determine the coordinates of the maximum point on the revenue graph. Round the coordinates to the nearest hundredth.

16. Determine the breakeven points. Round to the nearest hundredth.

17. Express the profi t, P, in terms of p.

18. Graph the profi t function. Determine the coordinates of the maxi-mum point of the profi t graph. At what price, p, is profi t maximized? Round to the nearest cent. This will be the price at which Toejack will sell!

19. Write the business summary statement by fi lling in the blanks.

In summary, to start this business, __a.__ Toejacks should be manufactured. Each should be sold at $__b.__. The breakeven point is reached at a price of $__c.__ or $__d.__, but a profi t is made at any price between those prices. At the selling price, there is a revenue of $__e.__ and expenses of $__f.__, resulting in a profi t of $__g.__.

20. If shares of stock are sold with an initial value of $5 each, how many shares must be sold to get enough money to start the business?

The scatterplot has a linear form. See margin.

q = –423.61p + 14,315.94

(19.96, 56,611.81). The profi t is maximized at a price of $19.96. Seeadditional answers for graph.

P = –423.61p2 + 16,908.43p – 112,113.55

TEACHExercises 4–20 These problems guide stu-

dents through the model-

ing process. They must be

assigned in their entirety

since they are cumulative

and sequential.

ANSWERS6.

8. Based on the correlation

coeffi cient of 0.92, the

linear regression line is a

good predictor.

9. r = –0.92 This is a signifi -

cant correlation because

the coeffi cient is close

to –1.

19. a. 5,661; b. $19.96;

c. $8.40; d. $31.52;

e.$116,979.26;

f. $60,367.45;

g. $56,611.81.

See margin.

See margin.

E = 6.12q + 24,500

R = pq

R = –423.61p2 + 14,315.94p

E = –2,592.49p + 112,113.55

50

130,000

(16.90, 120,952.14)

(8.40, 90,343.87) and (31.52, 30,403.76)

See margin.

12,074




CHAPTER

Examine the scatterplot below. It depicts the rate of failures reported for a single product. A product failure is when a product fails to do what it was manufactured to do. The diagram below is called a “bathtub curve.” Write a short newspaper-type article centered on this graph, based on a hypothetical situation you create. An electronic copy of the graph can be found at school.cengage.com/math/fi nancialalgebra. Copy and paste it into your article.

You Write the Story!!Real Numbers

Assessment2

Reality Check

0 0.5 1 1.5 2 2.5

Product Failure Rate Over Time

Time in Years3 3.5 4 4.5

Failu

re R

ate

1. Corporations pride themselves on the recognition of their logos. This project involves creating a game. Use the library or the Internet to fi nd logos of twelve popular brands. Look only for logos that do not include the corporate name. Paste the logos on a sheet of paper. With teacher approval, give the class the sheet of logos, and ask students to write the brand name next to each logo.

2. Use the Internet or library to fi nd more details on the failures of the three products mentioned at the beginning of the chapter: New Coke, the Edsel, and the Sony Betamax. Write a report on the specifi c reasons for each failure.

3. Find an example of a product not mentioned in this chapter that failed. Prepare a report detailing the story behind the product’s inven-tion and its failure.

CHAPTER 2 ASSESSMENTREAL NUMBERSYou Write the StoryStudents’ answers will vary.

Begin by having them focus

on the shape of the curve.

Why are the points at the

beginning and at the end of

the time cycle higher than

those in the middle? Why are

the mid-cycle points close to

horizontal? Once they have

established the nature of the

graph, the article should be

easy to write.

REALITY CHECKThe Reality Check projects

are a terrifi c form of alterna-

tive assessment. They give

students an additional ave-

nue to show what they have

learned, so their grades are

not solely based on tests.

The Reality Check Projects

in this lesson ask students

to do research, interview

business workers, read

the business section of a

newspaper, and more. Each

project is designed so that

students can use what they

have learned in this chapter

as a springboard for further

work.


4. Interview a local businessperson. Ask for examples of fi xed and vari-able expenses. Do not ask for amounts as that information is private. Make a comprehensive list. Also ask about the history of the business and how he or she became involved in it.

5. Trace the history of the portable, hand held calculator from inception to the present. Include brand names, sales fi gures, features, pictures, model names, etc. Prepare the fi ndings in a report.

6. On January 1, 1962, the Beatles, looking for their fi rst recording con-tract, had an audition with Decca records. They were turned down, and legend has it that Decca said “ . . . guitar groups are on the way out.” Use the library and/or the Internet to research the international sales of Beatles recordings over the past 5 decades and any other fi nancially-related Beatles facts. Compare Decca’s decision to the product failures discussed in this chapter. What are the similarities and differences? Prepare the fi ndings in a report.

7. How prevalent are brand names in society? With teacher approval, get two copies of the same newspaper or magazine. Divide the class into two teams. First, give the number of pages in that publication. Next, have each team predict the number of times a brand name will be used. Have each team read through the entire publication (teams may split up the reading) and count every brand name that is written in the publication. If a name is written multiple times, count every time it is written. Write in the newspapers or magazines to easily keep track. Compare fi ndings, and if they differ, fi nd out where they differ. How did the fi ndings compare to the predictions?

8. Search the Internet for three different websites that offer breakeven calculators. Compare and contrast them. What can one do that the other(s) can’t? Write up a recommendation for the use of one of the three calculators and justify the recommendation.

9. Look either in the Business section of a newspaper or online to iden-tify three companies that claim to have made a profi t over a period of time. Research how they each defi ne profi t, and state the monetary amounts that each is quoting as their profi t for the time period.

10. Many children set up lemonade stands in front of their homes when they were younger. What would the fi xed costs of a lemonade stand be? What would be the variable costs? At what price would a glass of lemonade be sold? Explain how to decide the price. Estimate revenues and profi t over a one-week period.

Go to www.cengage.com/school/math/fi nancialalgebra where you will fi nd a link to a website containing current issues about modeling a business.

Assessment 109

Dollars and Sense Your Financial News Update



REVISITEDReally!Really?

Ford Motor Company predicted 1958 Edsel sales to exceed 200,000 cars. Only 63,107 of the 1958 models were sold. The 1960 model saw only 2,846 cars sold. During the three years of production, approximately 110,847 Edsels were manufactured.

Today, less than 6,000 of them remain. As a rare curiosity, they are prized by many car collectors and have grown in value.

The following bar graph gives the values of a 1958 Edsel Villager 9-Passenger Station Wagon during the years 1999–2008. Because the value depends on the condition of the car, car appraisers rate the condi-tion of a classic car. On this graph, Condition 2 is the best condition and Condition 6 is the poorest condition.

1. Give an approximate value for the 1958 Villager in a condition of 6 in 2008.

2. Give an approximate value for the 1958 Villager in a condition of 2 in 2008.

3. Approximate the difference between a 1958 Villager in a condition of 6 and in a condition of 2 in 2008.

4. Approximate the difference between a 1958 Villager in a condition of 2 in 1999 and in 2008.

Look at the general trend of the graph. If a failure is kept for long enough, it may prove to be a good decision! Go online and look for pic-tures of the original 1958 Edsel. Also fi nd photos of the 1958 Chevrolet, the 1958 Chrysler, and the 1958 Buick. Does the Edsel look very different from the other cars? Consumers thought it did! And that’s reality!

234

16000

14000

12000

10000

8000

6000

4000

2000

05

Condition

1958 Villager 9-Passenger Wagon

Pric

e (U

S$)

6

1999200020012002200320042005200620072008

Source: Edsel.com, http://www.edsel.com/charts/e58vil9p.jpg

REALLY? REALLY! REVISITEDIn the Really? Really!

feature at the beginning of

the chapter, students were

introduced to products

that were market failures.

Certainly, the manufac-

turers of these products

envisioned market success.

But, for numbers of rea-

sons, each individual to the

product, consumers just

didn’t make the purchases.

Here, students revisit one

such product failure, the

Edsel. The structure of this

bar graph might be new to

students and will need an

explanation. The concepts

of automobile deprecia-

tion and appreciation will

be explored in detail in the

Automobile chapter, but

are worth mentioning here.

Often some cars depreciate

at the outset and then after

numbers of years become

a collector’s item. Once

that happens, the demand

for them increases and the

value of the car appreciates.

This appears to be the case

with the Edsel.

After completing the ques-

tions related to the graph,

encourage students to

follow up with the Internet

research extension activity.

Remind them of the role

perception played in stock

splits. Link that concept to

how perception played a

role in the sale of the Edsel.

$1,000

$14,000

$13,000

$7,000


1. Examine each scatterplot. Identify each as showing a positive corre-lation, a negative correlation, or no correlation.

a. b. c.

2. If each set of bivariate data has a causal relationship, determine the explanatory and response variables for each set of data.a. number of hours spent reading and page number on which you

are reading b. calories burned and number of minutes of exercisingc. amount paid as income tax and the amount of a paycheck d. pounds of hamburger used to make a meatloaf and number of

people that can be fed from the meatloaf

3. Which of the following scatterplots does not show a line of best fi t?

a. b. c.

4. Describe each of the following correlation coeffi cients using the terms strong, moderate, or weak and positive or negative.a. r = 0.17 b. r = –0.62 c. r = –0.88 d. r = 0.33 e. r = 0.49 f. r = –0.25 g. r = 0.91

5. The graph shows supply and demand curves for the newest game controller for the VVV video game system.a. What is the equilibrium price? b. What will happen if the price is set

at $7.99? c. How many game controllers are demanded

at a price of $7.99? d. How many game controllers are supplied at

a price of $7.99? e. What will happen if the price is set at

$12.99?

q

p$11.49

Supply

Demand

$7.99

1,000

250

Applications

Assessment 111

positive negative none

hours-explanatory; page number-response

minutes exercised-explanatory; calories-response

paycheck-explanatory; taxes-response

pounds of hamburger-explanatory; people-response

will attempt to sell the excess product at a lower price.

b

weak positive

moderate negative

$11.49

Demand will exceed supply.

1,000

250

Supply will exceed demand, and suppliers

strong negative

weak positive

moderate positive

weak negative

strong positive



6. The demand function for a certain product is q = –300p + 10,000. The fi xed expenses are $500,000 and the variable expenses are $2 per item produced.a. Express the expense function in terms of q. b. Use substitution to express the expense function in

terms of p. c. If the price is set at $20, what quantity will be demanded? d. If price is set at $25, fi nd the demand. Use these numbers in a

complete sentence that explains what they mean. e. If q = 1,000 widgets, fi nd E, the cost (expense) of producing

them. Use both numbers in a complete sentence to explain what they mean.

f. If the price is set at p = $15, how much will it cost to produce the correct number of widgets? Use these numbers in a complete sentence to explain what they mean.

7. Let the expense function for a particular item be defi ned as y = –1,950x + 53,000. Let the revenue function be defi ned as y = –450x2 + 10,000x, where x represents price in each equation. Use this window.a. Graph the two functions. b. Determine the x- and y-coordinates of

the fi rst point where the two graphs intersect. Round those values to the nearest whole number.

c. Explain the signifi cance of this point in the context of expense, revenue, and price.

8. Express the revenue equation in terms of price given the demand function.a. q = –900p + 120,000 b. q = –88,000p + 234,000,000

9. The expense function for a widget is E = –3,000p + 250,000. The revenue function is R = –600p2 +25,000p.a. Write the profi t equation in simplifi ed form. b. Use the axis of symmetry formula to determine the maximum

profi t price and the maximum profi t.

Use this situation to answer Exercises 10–25. A company is interested in producing and selling a new device called an eyePOD (eyewear personal optical device). The eyePOD is an MP3 and video player built into a pair of sunglasses. The user can listen to music from the small earphones and watch videos projected on the screen behind the glasses.

10. As the price of the eyePOD increases, what is expected to happen to the quantity demanded?

11. The horizontal axis represents price, and the vertical axis represents quantity. Does the demand function have a positive or negative slope? Explain.

Xmin=0Xmax=30

WINDOW

Xscl=1Ymin=0Ymax=70000Yscl=1Xres=1

E = 2q + 500,000

$529,000 to produce widgets that sell for $15 each.

E = –600p + 520,000

revenue and the expense will be approximately $42,026.

P = –600p2 + 28,000p – 250,000

4,000

E = 502,000; it costs $502,000 to produce 1,000 widgets.

E = 529,000; it would cost

See margin.

x = 6 and y = 42,026

When the price is set at approximately $6, both the

R = –900p 2 + 120,000p

R = –88,000p 2 + 234,000,000p

ANSWERS

6d. demand = 2,500; when

price is set at $25 per

item, the demand for

the item will be 2,500.

7a.

9b. The maximum profi t

price is approximately

$23.33. At that price,

the maximum profi t

is approximately

$76,666.66.

See margin.

See margin.

decreases

The demand is decreasing; the slope is negative.


12. The market research department conducted consumer surveys at college campuses and reported its results. In these ordered pairs, the fi rst number represents price, p, and the second number represents the quantity demanded, q. The points are listed as ( p, q).

(300, 10,000), (325, 8,900), (350, 8,800), (375, 8,650), (400, 6,700),(425, 6,500), (450, 5,000), (475, 4,500), (500, 4,450), (525, 3,000)

Make a scatterplot of the data.

13. What is the correlation coeffi cient? Round it to the nearest hun-dredth. Is this line a good predictor? Explain.

14. Write the regression equation. Remember that the demanded quan-tity, q, is the dependent variable. Round the slope and y-intercept to the nearest hundredth.

15. The accounting department has calculated that this could be the big-gest product to hit the market in years. It anticipates the fi xed costs to be $160,000 and the variable cost to be $150 per eyePOD. Express expenses, E, as a function of q, the quantity produced.

16. Express the revenue, R, in terms of p and q.

17. Express the revenue, R, in terms of p.

18. Recall the transitive property of dependence. Express expenses, E, in terms of p. Round to the nearest hundredth.

19. Graph the expense and revenue functions.a. Determine an appropriate maximum horizontal-axis value. b. Determine an appropriate maximum vertical-axis value. c. Sketch the graphs of the expense and revenue functions.

20. Determine the coordinates of the maximum point on the revenue graph. Round to the nearest hundredth.

21. Determine the breakeven points. Round to the nearest hundredth.

22. Express the profi t, P, in terms of p.

23. Graph the profi t function. Determine the coordinates of the maxi-mum point of the profi t graph. At what price, p, is profi t maximized? Round to the nearest cent. This will be the price at which one eye-POD will sell!

24. Write the business summary statement by fi lling in the blanks.

In summary, to start this business, __a.__ eyePODS should be manu-factured. Each should be sold at $__b.__. The breakeven point is reached at a price of $__c.__ or $__d.__, but a profi t is made at any price between those prices. At the selling price, there is a revenue of $__e.__ and expenses of $__f.__, resulting in a profi t of $__g.__.

25. If shares of stock are sold with an initial value of $10 each, how many shares must be sold to get enough money to start thebusiness?

Assessment 113

See margin.

–0.98; because the absolutevalue of the correlation coeffi cient is greater than 0.75, this is a good predictor.

q = –30.74p + 19,330

E = 150q + 160,000

R = pq

R= –30.74p 2 + 19,330p

E = –4,611p + 3,059,500

700

3,100,000

(3,14.41, 3,038,784.16)

(161.13, 2,316,534.30) and (617.69, 211,315.67)P = –30.74p 2 + 23,941p – 3,059,500

(389.41, 1,601,946.66); the profi t is maximized at a price of $389.41.

See margin.

26,394

12.

24. a. 7,360; b. $389.41;

c. $161.13; d. $617.69;

e. $2,865,877.15;

f. $1,263,930.49;

g. $1,601,946.66



CHAPTER MModeling a odeling a BBusinessusiness · 2-1 Interpret Scatterplots ... 2-3 Supply and...

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