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Optimization Techniques - Sam Houston State University

1 WEB CHAPTERWEB CHAPTER PREVIEWN ormativeeconomic decision analysis involves determiningthe action that best achieves a desired goal or objec-tive. This means finding the action that optimizes(that is, maximizes or minimizes) the value of anobjective function. For example, in a price-outputdecision-making problem, we may be interested indetermining the output level that maximizes a production problem, the goal may be to find thecombination of inputs (resources) that minimizesthe cost of producing a desired level of output. In acapital budgeting problem, the objective may be toselect those projects that maximize the net presentvalue of the investments chosen.

cisions are made by comparing the marginal benefits of a change in the level of an ac-tivity with the marginal costs of the change. A change should be made as long as the mar-WEB CHAPTER A Optimization Techniques / 1 C E A = = = (= (WEB CHAPTER A Optimization Techniques

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  States, University, Technique, Houston, Tivity, Sam houston state university, Activ ity

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