Module10 - Decision-Making Preliminaries Problem Definition...

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Decision-Making Preliminaries Problem Definition and Solution Generation Part I
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Economic Decision Process 1 Problem (need or opportunity) Recognition and Definition 2 Generation of Solution Alternatives 3 Development of Feasible Solution Alternative Cash Flows 4 Economic Evaluation of Alternatives, including cases under uncertainty and risk 5 Selection and Implementation of Best Alternative 6 Post-implementation Analysis and Evaluation
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Before solving a problem or taking advantage of an opportunity, the situation must be clearly defined. This may be straightforward or it may require extensive data analysis and investigation. “The formulation of a problem is far more often Problem Definition
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A Problem The difference between a current situation and a desired or optimal situation. Requires assessment of current situation Requires definition of desired situation Pitfalls that must be avoided in its definition Must differentiate between symptoms and problems Use symptoms to track down problems Must focus the scope of the problem
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Solutions to Problems Most of the time, problems are thrown at us out of circumstance and we must correct the situation. Problems generally result in higher costs Analysis often leads to making minimum cost decision .
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