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1
What is an optimization model?
Glossary Term:
model—
A representation of a
problem or system in
a worksheet
application such as
Excel or Lotus 1-2-3.
Glossary Term:
optimization model—
A model that seeks
to maximize or
minimize some
quantity, such as
profit or risk.
In today's competitive global economy, people are faced with
many difficult decisions. These decisions include allocating
financial resources, building or expanding facilities, managing
inventories, and determining product mix strategies. Such
decisions might involve thousands or millions of potential
alternatives. Considering and evaluating each of them would be
impractical or even impossible. A model can provide valuable
assistance in analyzing decisions and finding good solutions.
Models capture the most important features of a problem and
present them in a form that is easy to interpret. Models often
provide insights that intuition alone cannot.
An optimization model has three major elements: decision
variables, constraints, and an objective.
decision variables
Are quantities over which you have control;
for example, the amount of product to
make, the number of dollars to allocate
among different investments, or which
projects to select from among a limited set.
constraints
Describe relationships among decision
variables that restrict the values of the
decision variables. For example, a
constraint might ensure that the total
amount of money allocated among various
investments cannot exceed a specified
amount, or at most one project from a
certain group can be selected.
objective
Gives a mathematical representation of the
model's objective, such as maximizing profit
or minimizing cost, in terms of the decision
variables.
OptQuest User Manual
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