Section 1.2

Applications of Linear Functions

Linear functions are prevalent throughout business and economics. They provide a simple way to model economic quantities. Even if a linear function is not the best type of function to model a quantity, often they are used as an initial model to help understand a situation and all of its complexities. In this section we’ll look at a number of different situations in which a linear model might be appropriate. In later chapters we’ll revisit these applications and modify them as needed to account for properties which linear models don’t provide.

Linear functions are composed of two pieces separated by addition or subtraction. Each of these pieces is called a term. We’ll start this section by examining how we can determine what these terms tell us about the function. Once we understand how to find the terms, we’ll look at some specific examples of linear functions in business. The first linear function we’ll examine is a linear cost function. In section 1.1 we looked at some examples of linear cost functions to help us understand variables and function notation. In this section we’ll look at the individual pieces of a linear cost function to see what they represent in business. Then we’ll conclude this section with several more examples of linear functions. Each of these examples will help to model milk production at a dairy.

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