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In this essay an effort has been made to understand the different application of mathematics in economics and to analyze its usage in day-to-day life. It was also observed how the study of mathematics and economics could be combined and applied in our life.
I would like to start by mentioning that I come from a science background. So, I was very scared at first when I decided to pursue economics honors. I had studied economics till tenth standard but I knew that studying economics at the degree level would be totally different and difficult of course. But when the classes started here, I found that economics was all about finding and coming out with results using mathematical tools. I discovered that mathematics and economics were very inter-dependent as one was required to complete the other. According to me, it is impossible to study economics without mathematics.
I would like to be honest in this analysis and would like to state only those applications that I as a science student feel connect with the two vast fields of economics and mathematics. So, mathematics can be applied in economics in the following ways:
Integration is all about summing up small units to estimate about the larger sum or the larger whole. In economics too, we can see that how small or large countries get together so that they can add up their power to become a greater coalition altogether. This would benefit both the countries with regard to economic and political ties. This idea can be applied to any gathering like the coalition of parties or politicians to get majority so that they can come in power by winning in the elections.
We can use the tool of differentiation in order to break something to its smaller parts or to distinguish something in a smaller level. When we look at the subject of microeconomics, we can see that how the mathematical tool of differentiation is used to find the marginal cost, marginal revenue, marginal income, etc.
Mathematics can be used in economics to collect particular information. We can use the mathematical tool of ‘matrices’ in order to collect and arrange a particular data such as the population of a country, the people working in a company under different departments, boys and girl studying in a class or a school.
The mathematical tool of ‘determinants’ can be used to calculate values arranged in a particular way. For example, if we know the total number of available resources and the people misusing a specific type of resource we can tabulate the results and find till when our resources would last, people in the bank can use the mathematical tool of ‘determinants’ to calculate the amount of total money the people have deposited in different accounts.
Mathematics makes the study of economics easier and enables the students to have a more systematic approach. Statistics is a very strong mathematical tool which can enable us to interpret important data in a more efficient way. Statistics enables us to understand a data clearly. For example, if we want to check which commodity is trending and minting money in an economy we can use statistics to find the majority as the one with the maximum value will have the tallest bar in the graph taken.
We can take the help of graphs to study the relationship between two given entities. We can compare any entity with time so as to find the rate of change of that particular thing or entity. We can find the relationship of an entity which is independent and another which is dependent using a graph by placing the independent value on the X-axis and by placing the dependent value on the Y-axis.
The mathematical tool of probability is often used by trade experts and even economists to check the probability of the happening of an event so as to make accurate predictions. Every company relies on probabilities to check if the product they are going to bring out in the market would gain profit or not and based on these probabilities they come out with innovative and creative ideas to get maximum benefits and incentives.
We can use mathematical formulae for the determination of some important results and conclusions. These conclusions can help us to carry out our research on a particular topic more efficiently and these are impossible without the mathematical formulae.
In mathematics, we are taught from the very beginning to find out the unknown quantity which we often call as ‘x’. This actually instills in our mind a sense of how to find an unknown quantity. Similarly, we can improve an economy by finding those elements which are missing in an economy to improvise it for the better.
Linear algebra provides us with the opportunity of understanding relations between different constants and variables. Similarly, we can use linear algebra to establish a relationship between different sectors of an economy.
Logical and analytical reasoning is very important to study economics as almost all concepts in economics are linked with logical reasoning and deduction. The knowledge in these domains is required to even pass the entrance exams to study the course of economics.
Therefore, we can clearly understand that mathematical tools like matrices, determinants, probability, statistics and all the other mathematical tools which are mentioned above can be used in economics. The use of these tools in economics will enable the students to explore larger domains that is possible only because of the combination of the domains like mathematics and economics. Studying economics would be impossible without the use of mathematics as it is the very foundation on which economic concepts are built. The use of mathematics in economics helps the people in understanding the complexities of the economy of a country better. It also enhances and expands the vision of people so that they can understand the economy better. The economists who make plans and predictions for a country are all well versed in mathematics as they know its importance in the field of economics.
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