Chapter two

Matrix algebra and its applications

Dear student! What do you know about matrix algebra? Why we learn matrix?
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Introduction

It is evident that business problems are amenable to quantification thereby calling up for the
application of mathematical models. Of the various quantitative techniques, this section tries to
introduce students of business stream about major topics in matrix algebra. The section deals
with basic concepts of matrix algebra, dimension and types of matrices, matrix operations and
techniques, inverse of a matrix and major applications including solving system of linear
equations. In total, this part of the learning task introduces students of business stream about
matrix algebra principles and ways of applying them in handling real life business problems at
individual or organizational level scientifically.

Matrix concepts:

Why we learn matrix? There are three major reasons for learning matrix:
1. Matrices are used to handle large linear systems
2. Matrices are used to solve complex linear equations
3. Matrices are an effective means for summarizing voluminous business data.

Definition of a Matrix: A matrix is a rectangular array of numbers, parameters, or variables

each of which has a carefully ordered place within the matrix. The numbers (parameters or
variables) are referred to as elements of the matrix. The numbers in the horizontal like are called
rows; the numbers in a vertical line are called columns. It is customary to enclose the elements of
a matrix in parentheses, brackets, or braces to signify that they must be considered as a whole
and not individually. A matrix is often denoted by a single letter in bold face type. The first
subscript in a matrix refers to the row and the second subscript refers to the column.
A general matrix of order m x n is written as:

X= x11 x12 x1n

x 21 x22 x2n

Xm1 xm2 xmn (mxn)

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Matrix X above has m rows and n columns or it is said to be a matrix of order (size) m x n (read
as m by n).

Example:
A= a11 a12 a13
a 21 a22 a 23
a 31 a 32 a33 3x3

Here A is a general matrix composed of 3x3 = 9 elements, arranged in three rows and three
columns. The elements all have double subscripts which give the address or placement of the
element in the matrix; the first subscript identifies the row in which the element appears and the
second identifies the column. For instance, a23 is the element which appears in the second row
and the third column and a32 is the element which appears in the third row and the second
column.

Dimensions and Types of Matrices: Dimension of a matrix is defined as the number of rows
and columns. Based on their dimension (order), matrices are classified in to the following types:

1. A row matrix: is a matrix that has only one row and can have many columns.

E .g. A = 2 5 7 is a row matrix of order 1x3.

2. A column matrix: is a matrix with one column and can have many rows.
E.g. B = 1

is a column matrix of dimensions 3x1.

3. A square matrix: is a matrix with equal number of rows and columns.

1 4 3
E.g. C = 6 ; D= 2 6 E= 2 2 5
3 8 ; 8 6 9

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 4. A diagonal matrix: is a square matrix where its all non- diagonal elements are zero.

E.g. x = 2 0 0
0 6 0 is a diagonal matrix of order 3x3.
0 0 11

5. A scalar matrix: a square matrix is called a scalar matrix if all its non- diagonal elements
are zero and all diagonal elements are equal.
6 0 0
E.g. Y = 2 0 Z= 0 6 0
0 2 0 0 6

6. A unit matrix (Identity matrix): is a type of diagonal matrix where its main diagonal
elements are equal to one.

1 0 0
E.g. B = 0 1 0
0 0 1

7. A null matrix (zero matrix): a matrix is called a null matrix if all its elements are zero.

0 0 0
E.g. A= 0 0 0
0 0 0

8. A symmetric matrix: a matrix is said to be symmetric if A = At.

E.g. A = 8 2 1
2 3 4
1 4 5

Learning Activity 2.1

Dear student, as we have seen above there are various dimensions and types of matrices. In line
with this, what do you conclude about the relationship of scalar matrix and diagonal matrix? And
about unit matrix and scalar matrix?

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 Remark: It is seen above that every scalar matrix is a diagonal matrix; whereas a diagonal matrix
need not be a scalar matrix. Every unit matrix is a scalar matrix; whereas a scalar matrix need
not be a unit matrix.

Matrix Operations and Properties:

1. Matrix equality: two matrices are said to be equal if and only if they have the same dimension
and corresponding elements of each matrix are equal.

3 0 3 -4 3 0
E.g. A= B= C=
1 -4 1 0 1 -4

A ≠ B; A = C; B ≠ C.
2. Transpose of a matrix: If the rows and columns of a matrix are interchanged the new matrix
is known as the transpose of the original matrix. If the original matrix is denoted by A, the
transpose is denoted by A or At. Transposition means interchanging the rows or columns of a
given matrix. That is, the rows become columns and the columns become rows.

E.g B= 3 5 6 9
0 11 13 8
6 8 3 4

The transpose of matrix B, denoted by B' or Bt is given as:

3 0 6
t
B = 5 11 8
6 13 3
9 8 4

The dimension of B is changed from 3x4 to 4x3.

A= 1 3 A = 1 0 2 (2 X 3)
0 4 (3x2) 3 4 8
2 8

The following properties are held for the transpose of a matrix:

 Property 1: (At)t =A
 Property 2: (aA)t = aAt, where (a) is a scalar (at = a)
 Property 3: (A+B)t = At + Bt

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  Property 4: (AB)t = BtAt

3. Addition and subtraction of matrices: Two matrices A and B can be added or subtracted if
and only if they have the same order, which is the same number of rows and columns.
Example:
A= 2 0 B= 3 6
-5 6 4 1
Then;

2+3 0+6 5 6
A+B = -5+4 6+1 = -1 7

1 5 10 2
If A = 6 7 B= 8 6
8 9

A+B is not defined, since orders of A and B are not the same.

2 3 4 3 2-4 3-3 -2 0
A-B= 1 0 - 2 1 = 1-2 0-1 = -1 -1

9. Matrix Multiplication

Two matrices A and B can be multiplied together to get AB if the number of columns in A is
equal to the number of rows in B.
E.g. 1 2 2 1 4
A= 3 4 B= 3 0 5
0 1 (3x2) (2x3)

Then, A x B = (1x2) + (2x3) (1x1) + (2x0) (1x4) + (2x5)

(3x2) + (4x3) (3x1) + (4x0) (3x4) + (4x5)
(0x2) + (1x3) (0x1) + (1x0) (0x4) + (1x5)

8 1 14
= 15 3 32
3 0 5 (3x3)
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Solved problems:
Finfine Furniture Factory (3F) produces three types of executive chairs, namely A, B and C. The
following matrix shows the sale of executive chairs in two different cities.
Executive chairs
A B C
Wukro 400 300 200
Mekelle 300 200 100 (2x3)

If the cost of each chair (A, B and C) is Birr 1000, 2000 and 3000 respectively, and the
selling price is Birr 2500, 3000 and 4000 respectively;
a) Find the total cost of the factory for the total sale made.
b) Find the total profit of the factory.
Solution:
Given: Let the quantity matrix be q
Let the price matrix be p
Let the unit cost matrix be v

400 300 200

q= p= 2500 V = 1000
300 200 100 3000 2000
4000 3000
Total cost = (unit cost) (Quantity)

= 400 300 200 * 1000

300 200 100 2000
3000
= 1,600,000
1,000,000

Total cost = Birr 1,600,000 + Birr 1,000,000 = Birr 2,600,000

Total profit = Total Revenue - Total Cost
Total Revenue = (price) (quantity)

400 300 200 * 2500

= 300 200 100 3000
4000
2,700,000
= 1,750,000
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Total Revenue = Birr 2,700,000 + Birr 1,750,000 = Birr 4,450,000
Profit = Birr 4,450,000 – Birr 2, 600,000
= Birr 1,850,000

Learning Activity 2.2

Dear student, having seen the properties of matrix, we will now turn our face to some activity.
Interest at the rates of 0.06, 0.07 and 0.08 is earned on respective investments of $3000, $2000
and $4000.
a) Express the total amount of interest earned as the product of a row vector by a column vector.
b) Compute the total interest by matrix multiplication.

Determinant of a Matrix:

Let A = a11 a12

a21 a22 ( 2x2)

A = a11 a12
a21 a22
is known as a determinant of order two and its value is given as: A = a11a22 - a12a21.

E.g. A= 6 4 A = 6 4 = 6(9)-7(4)=26
7 9 ; 7 9

3. Let A= a11 a12 a13

a21 a22 a23
a31 a32 a33

A = a11 a12 a13

a21 a22 a23 is called a third order determinant
a31 a32 a33

a22 a23 a21 a23 a21 a22

A = + a11 a32 a33 - a12 a31 a33 +a13 a31 a32

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= a11 (a22 a33 - a32 a23) – a12 (a21 a33-a31a23) + a13 (a21a32-a31a22)

E.g. Let A= 1 2 4
0 -1 0
-2 0 3 ; Find A .

A = 1 2 4 -1 0 0 0 0 -1
0 -1 0 = +1 0 3 -2 -2 3 + 4 -2 0
-2 0 3

= 1 (-1x3 – 0x0) -2 (0x3- (-2x0)) + 4 (0x0 – (-2x-1))

= -3 -0 -8
= -11

Inverse of a Matrix: In scalar algebra, the inverse of a number is that number which, when
multiplied by the original number, gives a product of 1. Hence, the inverse of x is simply 1/x; or
in slightly different notation, x-1. In matrix algebra, the inverse of a matrix is that which, when
multiplied by the original matrix, gives an identity matrix. The inverse of a matrix is denoted by
the superscript “-1”. Hence, AA-1 = A-1A = I.
Note that: A matrix must be square to have an inverse, but not all square matrices have an
inverse. The necessary and sufficient condition for a square matrix to possess its inverse is that
/A/ ≠ 0. Finding the inverse of a matrix requires the concept of row operations to be performed.
The row operations are the following:
A. Multiply or divide a row by a non- zero constant;

If A = 2 3
6 9

Multiply row one (R1) by -2 to get matrix B.

Then, B = -4 -6
6 9

Divide row two (R2) by 3 to get matrix C. Then, matrix

C = 2 3
2 3

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 B. Add a multiple of one row to another row;
If A = 1 2 multiply R1 by 2 and add to R2 to get matrix x.
3 4

Matrix X = 1 2
5 8

C. Interchanging of rows;

If A = 1 0 Interchange R1 and R2 ( R1 ↔ R2 ) ; to
2 4 get matrix D.

D= 2 4
1 0

Note: The first row elements in the original matrix become second row elements in the new
matrix and vice versa. The most important methods to find inverse of a given matrix is Gauss-
Jordan Inversion method. This method was developed by a mathematician called Gauss and it
was named so by the founder. Example: Find the inverse of the following matrix using the
Gauss- Jordan method.

A= 3 2
1 1

Solution

Steps:
First: write the given matrix at the left and the corresponding identity matrix at the right;

3 2 1 0
A/I = 1 1 0 1

Second : Interchange R1 and R2;

3 2 1 0 1 1 0 1
1 1 0 1 3 2 1 0

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Third: Multiply R1 by -3 and add the result to R2;
-3 R1 = -3 -3 0 -3
+
R2 = 3 2 1 0
0 -1 1 -3
The resulting matrix is given by:

1 1 0 1
0 -1 1 -3

Fourth: Simply add R2 entries to R1 entries;

R2 = 0 -1 1 -3
R1 = 1 1 0 1
1 0 1 -2
The resulting matrix is given by:

1 0 1 -2
0 -1 1 -3

Fifth: Multiply R2 by -1;

(-1) (R2) = 0 1 -1 3

The resulting matrix is given by;

1 0 1 -2
0 1 -1 3

Thus; the inverse matrix A, denoted by A-1 is given as:

A-1 = 1 -2
-1 3

Check! A.A-1 = A-1. A = I

= 3 2 1 -2 1 0
1 1 * -1 3 = 0 1

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Matrix Applications: A system of linear equations can be solved by the following methods
using matrix algebra:
1. Guess Jordan Method
2. Inverse Method
3. Cramer’s rule (the determinant method)
4. Markov chain

Use inverse and Guess Jordan Method to solve the following problems
Example 1
Investment One safe investment pays 10% per year, and a more risky investment pays 18% per
year. A woman has $145,600 to invest and would like to have an income of $20,000 per year
from her investments. How much should she invest at each rate?

Example 2
Investment A trust account manager has $1,000,000 to be invested in three different accounts.
The accounts pay 6%, 8%, and 10%, and the goal is to earn $86,000 with the amount invested at
10% equal to the sum of the other two investments. To accomplish this, assume that x dollars are
invested at 8%, y dollars at 10%, and z dollars at 6%. Find how much should be invested in each
account to satisfy the conditions
2.6 Markov Chains
This model is a forecasting model. It is probabilistic (stochastic) model. A Russian
Mathematician called Andrew Markov around 1907 develops this model.
Markov chains are models, which are useful in studying the evolution of certain systems over
repeated trials. These repeated trials are often successive time periods where the state (outcome
condition) of the systems in any particular time period can’t be determined with certainty.
Therefore, a set of transition probabilities is used to describe the manner in which the system
makes transition from one period to the next. Hence,. We can predict the probabilities of the
system being in a particular state at a given time period. We can also talk about the long run or
equilibrium or steady state.
The necessary assumptions of the chain:
1. The system condition (outcome) state in any given period depends on its state in the
Preceding period & on the transition probabilities
2. The transition probabilities are constant overtime
3. Change in the system will occur once & only once each period
eg. If it’s a week, its only once in a week
4. The transition period occurs with regularities
* If we start with days, we use the day until we reach our end.

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Example
1. A division of the ministry of public health has conducted a simple survey on the public
attitude towards smoking. From the results of the survey the department concluded that
currently only 20% of the population smokes cigarette & every month 10% of non-smokers
become smokers where as 5% of smokers discontinue smoking.
Required:
A. Write the current & transition matrices
B. What will be the proportion of the non-smokers & smokers in the long run?
Solution

1) Let U – stands for Smokers

N – Stands for non-Smokers

Initial state VUN(0) = (0.2 0.8)

To the next month
Smokers Non smokers
From Smokers 0.95 0.05 P = 0.95 0 .05
one month Non-smokers 0.10 0.90 0.1 0 .9

2. VUN(1) = VUN(0) x P VUN(2) = VUN(1) x P

= (0.2 0.8) 0.95 0.05 = (.27 .73) 0.95 0.05

0.10 0.90 0.1 0.90

= ( 0.27 0.73) = (0.3295 0.6705)

2. A population of 100,000 consumers make the following purchases during a particular

week: 20000 purchases Brand A, 35,000 Brand B & 45000 purchase neither Brand. From
a market study, it is estimated that of those who purchase Brand A, 80% will purchase it
again next week, 15% will purchase brand B next week, & 5% will purchase neither
brand. Of those who purchase B, 85% will purchase it again next week, 12% will
purchase brand A next week, & 3% will purchase neither brand. Of those who purchase
neither brand, 20% will purchase A next week, 15% will purchase Brand B next week, &
65% will purchase neither brand next week. If this purchasing pattern continues, will the
market stabilize? What will the stable distribution be?

Solution
Given: 20,000 purchase brand A
35,000 purchase brand B
45,000 purchase neither brand
Total consumers = 100,000 (20,000 + 35,000 + 45,000)
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Let VA represents the share of brand A purchasers
VB represents the share of Brand B purchasers
VN represent the share of neither brand purchasers
The system is arranged in a weekly basis
To the next week shopping period
From A B N

One week A 0.80 0.15 0.05

Shopping B 0.12 0.85 0.03 = P
Period N 0.20 0.15 0.65

The stable market means the long run or steady state market because it is noted that in the long
run the share will be stable.
And in the long run we have said that the share at n period is equal with the share at n + 1 period.
Therefore
(The share at n period) x (the transition probabilities) = (the share at n + 1 period)
Let the share of brand A purchasers be V1 in the long run
the share of brand B purchasers be V2 in the long run
the share of neither purchasers be V3 in the long run
Then (V1 V2 V3) 0.80 0.15 0.05
0.12 0.85 0.03 = (V1 V2 V3)
0.20 0.15 0.65

0.8V1 + 0.12V2 + 0.2V3 = V1

0.15V1+ 0.85V2 + 0.15V3 = V2
0.05V1 + 0.03V2 + 0.65V3 = V3
V1 + V2 + V3 = 1
Therefore V1 = 1 – V2 – V3
Substitute 1 – V2 – V3 in place of V1 to reduce your system in to two variable case
Take the first equation
0.8V1 + 0.12V2 + 0.2V3 = V1
0.8 (1- V2 – V3) + 0.12V2 + 0.2V3 = 1 – V2 – V3
0.8 – 0.8V2 – 0.8V3 + 0.12V2 + 0.2V3 + V2 + V3 = 1
add similar variables together
0.32V2 + 0.4V3 = 1- 0.8
0.32V2 + 0.4V3 = 0.2 this is a summarized equation from the first equation. And do the
same for the second equation.
0.15V1 + 0.85V2 + 0.15V3 = V2
0.15 (1 – V2 – V3) + 0.8V2 + 0.15V3 = V2
0.15 – 0.15V2 – 0.15V3 + 0.85V2 + 0.15V3 = V2
add together similar variables and take the constant values to the right side.
-0.3V2 = -0.15
V2 = -0.15
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 -0.30
V2 = 0.5 this implies the long run share for the purchasers of brand B will be
50%. Then using this value and the first summarized equation (0.32V2 + 0.4V3 = 0.2)
Find the value of V3 in the long run
That is, 0.32 (0.5) + 0.4V3 = 0.2
0.16 + 0.4V3 = 0.2
0.4V3 = 0.20 – 0.16
V3 = 0.04
0.04
V3 = 0.1
This implies the share of neither brand purchases in the long run will be 10%. Hence the share of
Brand A purchasers will be 0.4 (1 – 0.5 – 0.1)

Because we said above V1 = 1 – V2 – V3

Therefore V1 = 1 – 0.5 – 0.1
V1 = 0.4
That is the long run share of Brand A purchasers will be 40% of the total population
i.e. VA VB VN = (0.4 0.5 0.1)
Exercise
1. A vigorous television advertising campaign is conducted during the football reason to
promote a well-known brand X shaving cream. For each of several weeks, a survey is
made & it is found that each week 80% of those using brand X continue to use it & 20%
switch. It is also found that those not using brand X, 20% switch to brand X while the
other 80% continue using another brad.
Required
A) Write the transition matrix, assuming the transition percentage continues to hold for
succeeding weeks.
B) If 20% of the people are using brand X at the start of the advertising campaign, what
percentage will be brand X 1week later? Two weeks later?

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