Use Of Mathematics On Economic Profit Maximization

The Use of Mathematics in Economic Profit Maximization Introduction: Economics is a social science that deals with how individuals, governments, firms, and nations make decisions on allocating scarce resources to satisfy their unlimited wants. Economists use theories and mathematical models to provide solutions to many problems in decision making and forecasting in economics. I have decided to take a look at how math is used in the study of economics, specifically in economic models such as the profit maximization model or the demand model. This year I decided to take an economics course and so far we have looked at markets and businesses and I thought it would be interesting to research more on how firms use math to maximize profits for this math exploration. The objective of a business is generally to maximize profits. Firms generally use the profit maximization model and the demand model to help predict the price-output of a firm under changing market conditions. Accounting Profit: Profit is the difference between the total revenue subtracted by the total cost. Total revenue is simply the total amount of money that a firm receives from its sales and total cost means the monetary cost of production. Accounting profit can be modelled with a very simple equation of: Ï€= TR-TC where Ï€ stands for the profits made, TR for total revenue, and TC for total monetary cost of production (Ï€ is used to represent profit since the variable P is used to stand for price). Thus if aShow MoreRelatedRole of Mathematics in Business Economics1407 Words   |  6 PagesRole Of Mathematics in Business amp; Economics Introduction: Mathematics have been one of the primary elements of business and economics since ancient times, when farmers had to count the animals in their possession and merchants had to have a clear picture of their goods value. 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