Calculus in Economics: Crucial Insights for Business Growth

Calculus is a branch of Mathematics and is the study of the rate of changes. It helps us understand changes that happen between values and is used in a lot of different areas of studies such as physics, biology, engineering, economics, computer science, and many more! In this small report, I will be talking about calculus’s importance in economics. Calculus is widely used in economics and it can solve many crucial problems. In economics, calculus is used to record complex information, used in many concepts such as marginalism and elasticity.

Calculus also allows economists to find the maximal profit by giving an easy efficient way to calculate marginal revenue and costs.

The study of economics requires a good understanding of mathematics like calculus. In economics, calculus is necessary for a lot of topics such as marginal utility, marginal costs. Economics research uses calculus to examine functional relationships. An example of this would be the relationship between a worker’s salary vs education.

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If the years of education over the years and the normal wage also increase then there is a positive relationship. Differential calculus allows economists to study the average rate of change between average change in wage to a single-year increase in education. I can make a connection with the example and what I learned in Ms. Sum’s Calculus class as this touches the topic of the instantaneous rate of change which is the rate fo change( or you can say slope) at a certain point on the graph.

Another connection between calculus and economics is the concept of marginalism. Derivatives in calculus are identical to the economics concept of marginalism, as marginalism studies the change in an outcome which results from a single unit increase in another variable. The reason why marginalism is important in economics is that by finding out the marginal revenue (The income received by selling a unit of service or goods ,to make as much profit possible) which can help the administrators of the business with maximizing their benefits and to also measure the rate of expansion in production.

In economics Elasticity also requires calculus. Elasticity is the measure of how customers react to the pricing of a companies products/services. Usually, when a products price increases, the demand will decrease, but depending on the state market, the reaction of consumers can vary. So how does this relate to calculus? Well, the formula for calculating price is the percentage of change in the quantity of a selected product divided by the percentage change in the economic variable, to solve this equation you would need to know simple calculus to find derivatives.

In conclusion, some of us might not acknowledge how wonderful calculus is but its being used all around in professions I would never think would use calculus. Calculus is essential as it helps businesses grow by being used in equations that give insightful information to the business’s (maximal profit, marginal revenue, and costs, etc). While writing this report I was able to learn new things about economics and how Calculus plays a big roll in it and I was able to better understand how it is used in the real world.