Optimization: Decisions with Constraints

This chapter adds a new layer of detail to the Basic Business Model, assuming Widgets at one price are produced with a mix of labor and materials and Gadgets at a different price are produced with a different mix. If labor and material are limited, maximizing the objective of profit requires coordinated decisions about the quantities of the two products in the face of constraints. This chapter explores the concepts using stochastic approximation, which builds on simulation analysis in an intuitive and flexible way. This serves as a prelude to more formal mathematical programming optimization methods in the following chapter.