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Mathematical Economics

By Saherah Luhnat Noor, EconoHeart
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Mathematics, like every other branch of subjects, is ingrained into economics too. In fact, many large-scale concepts and principles can be well explained with this. Let's explore it briefly in today's blog. Mathematical economics is a branch of economics that mainly relies on mathematical models and methods to analyze economic problems and derive solutions. A range of techniques like calculus, linear algebra, matrices, graphs etc, is employed in them. You may already saw in previous blogs how we tend to use some maths to explain a theory or topic. It's main goal is to represent economic theories and relationships in a formal and mathematical way. This allows economists to analyze economic behavior, make predictions, and develop policies more rigorously and systematically. If you grasp it well, you can derive precise, quantitative predictions about how individuals, firms, and governments will respond to changes in economic conditions, policies, and other factors. It can be ...
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Deflation

By Saherah Luhnat Noor, EconoHeart
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We all know the concept of inflation and its impact, but have you thought about its opposite - deflation? Hilarious as it sounds, this concept also exists as daylight in the economy. Let's delve deeper into it today. Deflation is basically just the opposite of Inflation - a situation where consumers expect prices to fall further in the future. It may feel good in short run, but in reality deflation has more dire consequences compared to inflation. People may delay buying goods and services because they anticipate that they'll be cheaper if they wait. If you expect the price of electronics to drop next month, you might hold off on buying that new IPhone now. When consumers delay spending, it can lead to a decrease in overall demand for goods and services. This reduction in demand can result in lower production levels and job cuts, affecting the overall economy. There's a term called Deflationary Spiral, a particularly concerning scenario where falling prices lead to falling ...
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Inflation

By Saherah Luhnat Noor, EconoHeart
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Who doesn't know inflation? At least if not the term, you all surely know how the prices of everything increase day by day, year by year! Perhaps the greatest nightmare of every breadwinner. Let's delve deep into the concept of Inflation in the light of economics today. Inflation is a general rise in the prices of goods and services over time. Many things are responsible for it. For the sake of simplicity, we shall see the 3 key factors behind this phenomenon. A) Demand-Pull Inflation: When demand for goods and services is higher than what the economy can produce, businesses raise prices. Think of it as a lot of people chasing too few goods. Imagine everyone suddenly wants the latest IPhone 15! Retailers can't keep up with the demand, so they raise prices because they know people are willing to pay more. And as prices go up, the purchasing power of money decreases. This means you need more money to buy the same things you used to buy for less. B) Cost-Push Inflation: When t...
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