Calculus the World of Business

Calculus

The world of business is comprised of many unique disciplines. The manager can expect to synthesize all of them as part of their work. Therefore, a strong multidisciplinary background is essential in the pursuit of a major in Business Management. The subjects learned in this major will require a wide range of basic knowledge including economics, sociology, psychology and statistics. Calculus also plays a role, providing both a functional and a theoretical backdrop.

It is often considered that the basic functions of calculus are not used in the acquisition of a business education. However, understanding the fundamentals of calculus allows the student to derive formulae in financial courses. Students of Business Management should have a strong knowledge of corporate finance, and this requires some basic calculus. The models used to price derivatives are based on calculus. A stock option, for example, comprises an underlying asset with an intrinsic value and a fluid time value. This concept can be extended to any asset. Business Management is, at its core, managing assets. But to manage those assets requires the ability to understand how the value of those assets is derived.

Differential calculus forms a key component of the business world. Many important concepts in business management relate directly back to calculus. For example the yield curves on bonds, or the demand curve of a product relative to macroeconomic variables. There are many instances where a manager must interpret complex, interrelated and fluid variables in order to predict the future.

Integral calculus is useful when examining concepts involving fluidity. The business world is constantly changing. The numbers used to interpret the world in order to make managerial decisions are also constantly changing. The relationship between those numbers is also subject to constant flux. It is impossible to understand the business environment without understanding these relationships. A sound knowledge of calculus fundamentals allows for that.

The concept of limits also proves useful to the Business Management student. Management is a subject based on finding ways to achieve objectives. In many cases those objectives are quantifiable, thus to derive the best way to achieve those objectives requires calculus. The concepts, however, can also be applied to non-quantifiable objectives once the student understands the basic principles. The manager can then understand how to bring a variable such the organizational culture closer to a limit such as having a strong emphasis on integrity. Even without numbers, the principles of analyzing the relationships between variables remain the same.

A strong calculus background also gives the manager the confidence to tackle important mathematical tasks. Being able to "crunch the numbers" is an essential part of the manager's role. Too often managers feel uncomfortable working with numbers because of their limited mathematical background. This reduces their usefulness, however. Strong managers are not intimidated by the numbers, but rather view them as an essential component of the job. Therefore, part of the process of studying business management is to build the set of tools that will allow a manager to confidently approach all aspects of the job.

At its heart, calculus is the study of change. The concept of change is a major part of the manager's role. The world of business is constantly shifting. Calculus provides the theoretical backdrop to understanding the myriad of changes faced by managers today. When managerial decision making relies on a manager to understand the impacts of several different change processes, this illustrates a reliance on the principles of calculus. These principles teach prospective managers who to approach the subject of change, and to make sense of sets of interrelated variables.

Furthermore, if the Business Management student desires to pursue further education in the subject, the student will find that the value of calculus increases. All manner of variables are modeled and analyzed using calculus. Much of the canon of business school literature requires a very strong mathematical background to understand. A master's degree or doctoral degree in Business Management can scarcely be obtained without an exemplary level of knowledge of calculus. So further pursuit of a managerial education demands that undergraduate students also acquire the basic skills upon which they will be required to build.