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Sensitivity Analysis Assignment

Objective: To understand the concept of sensitivity analysis and its application in evaluating the robustness of a model$$s output with respect to changes in input parameters.

Instructions: Complete the following exercises and submit your answers in a report format, including any necessary calculations, graphs, and explanations.

Exercise $1$: Exploring Parameter Sensitivity

Task: Choose a simple economic model, such as the supply and demand model. Identify at least three key parameters in the model and perform a sensitivity analysis by varying these parameters one at a time for a coffee shop. Observe and document how changes in each parameter affect the equilibrium price and quantity.

Exercise $2$: Lemonade Stand Simulation

conduct a sensitivity analysis by altering the initial values of the following parameters: price per cup, cost per cup, and daily customer count. Record the impact on the net profit over a simulated month.

Exercise $3$: Coffeehouse Case Study

Task: For the Coffeehouse model, perform a sensitivity analysis on the parameters related to coffee bean price volatility and seasonal customer fluctuations. Analyze how these factors influence the monthly revenue and suggest strategies for mitigating risks associated with these uncertainties.

Exercise $4$: Independent Exploration

Task: Select a real$-$world system relevant to your field of study. Build a basic model representing this system and identify the critical parameters. Conduct a sensitivity analysis to determine which parameters have the most significant impact on the system$$s performance. Propose recommendations based on your findings.

Submission: Your report should include:

A brief description of each model and its parameters.

Detailed steps of your sensitivity analysis process.

Graphs or tables illustrating the results of your analysis.

A discussion section interpreting the results and their implications.

Recommendations or strategies based on your analysis.