What is Quantitative Techniques in Business?

Quantitative techniques may be defined as those techniques which provide the decision makes
a systematic and powerful means of analysis, based on quantitative data. It is a scientific method
employed for problem solving and decision making by the management. With the help of quantitative
techniques, the decision maker is able to explore policies for attaining the predetermined objectives.
In short, quantitative techniques are inevitable in decision-making process.

http://www.universityofcalicut.info/syl/QuantitativeTechniquesforBusiness.pdf

Examples:
1. Positive and Negative Correlation

Positive Correlation
When the variables are varying in the same direction, it is called positive correlation. In
other words, if an increase in the value of one variable is accompanied by an increase in the value
of other variable or if a decrease in the value of one variable is accompanied by a decree se in the
value of other variable, it is called positive correlation.
Eg: 1) A: 10 20 30 40 50
B: 80 100 150 170 200

X: 78 60 52 46 38
Y: 20 18 14 10 5
Negative Correlation:
When the variables are moving in opposite direction, it is called negative correlation. In
other words, if an increase in the value of one variable is accompanied by a decrease in the value
of other variable or if a decrease in the value of one variable is accompanied by an increase in the
value of other variable, it is called negative correlation.

Eg: 2) A: 5 10 15 20 25
B: 16 10 8 6 2

X: 40 32 25 20 10
Y: 2 3 5 8 12

2. Linear and Non-linear correlation

Linear Correlation
In a correlation analysis, if the ratio of change between the two sets of variables is same,
then it is called linear correlation.
For example when 10% increase in one variable is accompanied by 10% increase in the
other variable, it is the problem of linear correlation.
X: 10 15 30 60
Y: 50 75 150 300
Here the ratio of change between X and Y is the same. When we plot the data in graph
paper, all the plotted points would fall on a straight line.

Non-linear correlation
In a correlation analysis if the amount of change in one variable does not bring the same
ratio of change in the other variable, it is called non linear correlation.
X: 2 4 6 10 15
Y: 8 10 18 22 26
Here the change in the value of X does not being the same proportionate change in the value of Y.

Function

1.Demand Function:
As we know that the quantity demanded of a particular commodity by the buyers in the market is
depending
on the price. As the prices increases, the demand is decreases shown as figure. If q is the quantity of
a
commodity demanded and p is the price then the demand function is given by
q = f (p) shows q depends on p price
p = g (q) shows p depends on q
for example: q = a - bp or q = (10/p) or q = - 10p2 + p + 5

2. Supply function:
Price of any particular commodity in the market depends on the quantity of supply. As the quantity of
supply
increases the price is also increases. If x is the quantity of supply and p is its price then the supply
function
is given by x = f (p) or p = f (x).

3. Consumption Function:
The total consumption function of a firm is depending on the income as income increases the
consumption
expenditure also increases. If C is the consumption and I is the income then the consumption function
given
by
C = f (5) = a + bI where a, b are constants.
Example1: A company sells x tins of chicken each day at Rs. 80 per tin. the cost of production and
selling price of these tins is Rs. 50 per tin plus a fixed daily overhead cost of Rs. 18,000. Determine
the profit function. What is the profit if 2,000 tins are produced and sold a day? Find out the number
of tins produced in a day with no profit and no loss.
Solution: a). Per day x tins of chicken are produced with cost Rs. 80 per tin the revenue received per
day
is Revenue function
R (x) = 80. x
The cost of production per day cost function is c(x) = 1,800 + 50x
If P (x) is the profit function is given by
P (x) = R(x) - c(x)
= 80x - (50x +1,800) = 30x - 1,800
If 2,000 tins are produced and sold in a day then the profit is given by
P (2,000) = 30 × 2,000 - 18,000
= 60,000 - 18,000 = Rs. 42,000
b). for no profit and no loss then profit function is zero
P (x) = 0 = 30x - 18,000 = 0
10
30x = 18,000x = (18,000 / 30) = 600
600 tins per day.