Equations in Business Assignment 2022

Student’s Name
Equations in Business
Institutional Affiliation

Introduction
In the real business world, equations are important in the daily
activities and evaluation of businesses. In this assignment, I will develop an
equation that briefly describes a consumer’s expenditure. This equation
borrows from the micro-economic budget line constraint, a principle under
the theory of the consumer (Wetzstein, 2013). The equation is linear and is
as follows:
E=∑ xN +∑ yL+ S
In this equation, E represents a person’s expenditure. N represents the
quantity of necessities that a person buys at a particular time. L is the
quantity of leisure goods that a person buys/consumes within a particular
period. S represents the amount of money that a person saves over a given
period. Lastly, x and y are the unit prices of necessities and leisure goods
respectively. In general the summations of xN and yL show the total
expenditure on necessities and leisure goods respectively. Summation sign
means that a person consumes a number of necessities as well as Veblen
goods, and not just one of each.
This equation shows how a person spends his/her income assuming
that the consumer is rational. The concept of consuming and saving is
borrowed from the economic theories of consumption which argue that a
person can either consume or save his/her income at a particular period. The
assumptions from the real microeconomic theories and concepts also hold
for this particular equation that I have developed (Wang, 2018).
Solutions to the equation
In understanding the equation better, we evaluate an example that will be
adjusted to fit in two scenarios as follows:
Scenario one