���˿���

• Algebra is used in Maths when we do not know the exact number(s) in a calculation.

• In algebra we use letters to represent unknown values or values that can change.

• Algebra can be used in business when predicting sales, growth and profit.

Where is algebra used?

Algebra is commonly used in formulas when we do not know at least one of the numbers, or when one of the numbers can change.

Mathematical formulas

For example, the formula for the area of a rectangle is b × h (b is the base and h is the height.) If the base was 3 cm and the height was 7 cm, then the area would be 21 cm².

A different rectangle could have a base of 4 cm and a height of 10 cm. The area for this would be 40 cm².

As the values for the base and height can be changed, we can use algebra to represent the formula.

How is algebra used in business?

Algebra can be used to predict sales and how much a customer will spend. Algebra is used to estimate the life time value of a customer, which calculates the percentage of annual spend.

The formula used is:

y = 12 + 8x

Algebra is used because x (the number of months a customer has shopped with us) can change. y represents the percentage that a customer will spend in a year.

Imagine that a customer spends £50 in their first 2 months with us. We have to include their first month as x = 0, so their 2nd month will be x = 1.

Now we know x = 1, we can substitute it into y = 12 + 8x.

Therefore:

y = 12 + (8 × 1)
y = 20%

If 20% = £50. Then over a full year, 100% will equal £250 (5 × £50). This means we can predict a customer will spend £250 a year.