BC Managerial Economics Constrained Optimization & Budget Constraint Discussion

I’m working on a economics discussion question and need an explanation to help me understand better. **Respond with 250 words and 3 scholarly APA formatted sources and references:** ****Hi All, Most of decisions we make are constrained in some way. This makes sense as we generally can’t know everything or every possible outcome. When faced with constraints, it is important to consider the value of getting additional information and the cost it would take to get that additional information. If information is costly to obtain and/or is expected to be of little value, then we shouldn’t bother with it and should move forward with making our decision based on the information we know. Sometimes the constraints are much more explicit and known but there is little we can do about it. Our monthly budget is an example. We spend money to satisfy our needs and wants (hopefully starting with the needs first!), but our wants are unlimited while our budget is not, so we have to make decisions on how we go about getting the most benefit we can. Expand on your example (or come up with a new one) to demonstrate a rational approach to information gathering when making a decision. **** **Respond to Discussions Posts with 100 words and **1 scholarly APA formatted source and reference each**** ** **:**** ** ******1. Crawford Constrained optimization is an optimization problem that the decision maker will “choose the level of activity from an unrestricted set of values” (Thomas, & Maurice, 2020, p.90). For solving the optimization problems, you must use the analytical technique, which is marginal analysis, this involves changing the values of the choice variables with small amounts with doing this it will let you know “if objective function can be further improved” (Thomas, & Maurice, 2020, p.91). The marginal analysis will result with two simple rules to solving the optimization problems, these rules are unconstrained and constrained decisions. I love to shop online and in person; I just like to shop. We decided to buy a new bed, we started looking online to see what was available; we were interested in the Sleep Number beds. The constrained we had to do was make sure we could afford the bed with our budget. After all these beds can run from a few thousand dollars to many thousands of dollars (Sleep Number Corporation, 2020). These beds are air beds, and you can push a button and it will tell you what your sleep number is. When we went to the stores and tried the beds. We either sunk in them and could not get back up or they were just not comfortable. The more we thought and talked about it we decided to buy the basic Sleep Number bed. We could work it into our budget we had, plus we both could set our side of the bed as soft or as firm that we wanted. Now we had to decide how to get it to the house either by mail or have the store to delivery it and set it up (Sleep Number Corporation, 2020). We optimized by having the bed delivered and set up. It made more sense for them to delivery and set it up because it could be done in one day. Reference: Sleep Number Corporation, 2020. http://patft1.uspto.gov/netacgi/nph- Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=%2Fnetahtml%2FPTO%2 Thomas, C. R., & Maurice, S. C. (2020). Managerial economics: Foundations of business analysis and strategy (13th ed.). McGraw-Hill/Irwin. 2. Durham Essentially, constrained optimization is the ability to effectively maximize profits, while maintaining a cost-effective approach in meeting a business’ financial benchmarks. A simplified example of this is a hunting supply store that offers custom archery products. Archery customers often want the proverbial biggest bang for their buck. Archery products can be very pricey, especially when the customer is looking for custom hand made arrows with exact specifications. Arrow shaft weights, specialized fletching concepts, and arrows that match the individual shooting specifications of the archer. The constraints associated with this example, are the individual uniqueness associated with the individual archer’s abilities and personal preferences. While it is impossible to keep all the variances of these products in stock, it is important to offer a wide enough of a variety that customer is able to choose based on their individual needs (Rajagopalan, 2002). This can be very cost prohibitive for the business. Therefore, the preferred method for overcoming this constraint, is by offering a custom service that allows for the owner to build these products through their custom shop. Arrows can be built utilizing parts and arrow blanks, which allows for a made-to-order format of production. The end result is a sustainable business model that produces an increased marginal profit based on these custom orders (MADE-TO- ORDER MODEL, 2020). References MADE-TO-ORDER MODEL; Detroit’s fashion business takes aim at sustainability. (2020, August 17). _Crain’s Detroit Business_ , _36_ (33), 0003. Rajagopalan, S. (2002). Make to order or make to stock: model and application. _Management Science_ , _48_ (2), 241. ** ** ****

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