Question

Question 1 ) Briefly define binary variables and discuss the purpose of their usage in mathematical models.

Question 2 ) Discuss the importance of mathematical modeling in business problems and point out the limitations of linear programming in modeling actual business

Answer 1

1. Binary Vairables:-BInary Variables are those variables which only take two values. For example,

• Yes/No.

• True/False.

• Male/Female.

• Success/Failure.

Binary Variables are mainly used in statistics by the name of the binomial distribution. It can be divided into two types.

a) Opposite Binary Variables.

b) Conjunct Binary Variables.

A mathematical model is an explanation of a system using mathematical theories and language. The process of expanding a mathematical model is entitled mathematical modelling.

Mathematical models are used for translating problems from an application area and binary variables are helpful in mathematical modelling.

2. The importance of mathematical modelling in business problems.

A mathematical model is an explanation of real world situations. They help us understand how the real world problems happens. Every mathematical model tasks a set of inputs and mathematical functions requires an output. There are many ways in which mathematical models are used in the field of business models.

a) One of the most common decision making problem faced by any business is the cause investment decision, which can be solved by mathematical models like, net present value, internal rate of return etc.

b) Often business have the requirement of forecast certain factors, such as revenue, growth rate cost etc, in such cases, productive mathematical models are used.

c) Business often need to make optimize certain variables to control costs and secure maximum efficiency. Optimization mathematical models help in this situation.