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MGE Class 8:28.docx

MGE Class 8:28.docx - MGE Class Chapter 3 Marginal Analysis...

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MGE Class 8/28/17 Chapter 3 Marginal Analysis for Optimal decisions Optimization - An optimization problem involves specification of 3 things o Objective function to be maximized or minimized o Activities or choice variables that determine the value of the objective function o Any constraints that may restrict the values of the choice values Choice: hours of study vs GPA Hours of study per week GPA 10 3.0 15 3.4 22 3.7 30 3.9 40 4.0 - Study more and get a higher GPA - More hours are more sacrifices Choice: size of quality dept vs defects # of quality control inspectors % external quality rejects 1 25% 2 15% 3 10% 4 8% 5 7.5% - More workers is better - More workers is more pay KPI – Key performance Indicators
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