![]() ![]() To continue with the fictional case of residential development, suppose that you have two principal limiting fac- tors: working capital and bulldozer capacity. Of course, any objective function is limited by certain constraints. ![]() Your princi- pal financial objective is to maximize your profits, and this objective can be expressed as an objective function, or equation, that you want to maximize: Suppose that you make $20,000 on each home you build and $15,000 on each building lot you develop and then sell. You create and sell two products: building lots and houses. Suppose, for example, that you’re a residential real estate developer and contractor. EasyRefresher: How Optimization Modeling Works While this abstract definition sounds complicated, at least at the conceptual level, optimization modeling makes common sense once you provide a concrete example. With an optimization-modeling problem, you want to optimize an objective function but at the same time recognize that there are constraints, or limits. Excel’s Solver tool lets you solve optimization-modeling problems, also commonly known as linear programming programs. ![]()
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