# What is algebra?

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.

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