Academics, Upper School

Analyzing the Mathematics of Supply and Demand

After two major Saudi Arabian oil field installations were attacked by drone strikes in September 2019, students in The Northwest School’s Mathematical Modeling class analyzed how the event would raise gas prices. By measuring the percent of the world’s oil supply that had been comprised, the class estimated gas prices in the state of Washington would rise by 20-30 cents within a week. Their estimation turned out to be correct.

“Students were able to take what they learned, apply it immediately, and see it play out in a real time,” says Alex. “That is immediate validation for what they are learning, and it is rare to experience that.”

Mathematical Modeling is a new senior elective that tackles the mathematics behind economics, finance, public policy, and game theory. The class began the school year by studying interest rates and supply and demand, the latter of which teacher Alex Chen mentions are two of the strongest forces in economics. During the units, students learned the math behind each concept, learning how to calculate compounding interest and annual percentage rates on their own calculators and Excel sheets.

"So far, I’ve been able to apply everything we have been taught in Math Modelling to the real world,” says senior Keegan M. “Even if you aren’t interested in economics as a major, I think a class like this, is useful for anyone, just to have the basic knowledge of how the fundamentals of economics operate.”

The next unit the class will tackle focuses on the stock market and the mathematics behind various measures of stocks. During the unit, students will create mock stock portfolios and attempt to beat the S&P500, one of the benchmark measures of the U.S. stock market. Alex views it as a logical step in the curriculum, building upon the concepts of supply and demand and compound interest. Many of the students taking the class were in the Investment Interest Group last year.