It often is used by companies to study demand, pricing, supply and cost curves. Modeling Is used by management to simplify the complex world. A model may be physical, symbolic, verbal, graphic, or mathematical. A good model strips away excess detail but leaves essential behavior. For example, a model could be a representation of a distribution system illustrated graphically with a flow chart.
Models show relationships among the parts of a whole and assist with forecasting.
Model building is used in the physical and social sciences, as well as in business management. Linear Programming Is a widely used mathematical method of determining an optimum, single solution to a problem such as finding the minimum staff cost or the most nutritional mixture of ingredients. The technique can only be used with problems that can be translated entirely into numbers and have with a single, optimum objective or solution. Through this type of analysis businesses can estimate demand cycles, cost and supply functions, income distribution changes, and so forth. Econometrics uses regression and correlation analysis.