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Optimality modeling is the modeling aspect of optimization theory. It allows for the calculation and visualization of the costs and benefits that influence the outcome of a decision, and contributes to an understanding of adaptations. The approach based on optimality models in biology is sometimes called optimality theory. [1]
In welfare economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied. [1] The economists Richard Lipsey and Kelvin Lancaster showed in 1956 that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would ...
In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts: [1] Allocative or Pareto efficiency : any changes made to assist one person would harm another.
It is assumed that evolution by natural selection results in animals utilizing the most economic and efficient strategy to balance energy gain and consumption. The Marginal Value Theorem is an optimality model that describes the strategy that maximizes gain per unit time in systems where resources, and thus rate of returns, decrease with time. [2]
The real estate market is an example of a very imperfect market. In such markets, the theory of the second best proves that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal. [4]
For instance, from the example above in economics, if the maximal utility of two goods is achieved when the quantity of goods x and y are (−2, 5), and the utility is subject to the constraint x and y are greater than or equal to 0 (one cannot consume a negative quantity of goods) as is usually the case, then the actual solution to the problem ...
OFT is an ecological application of the optimality model. This theory assumes that the most economically advantageous foraging pattern will be selected for in a species through natural selection. [1] When using OFT to model foraging behavior, organisms are said to be maximizing a variable known as the currency, such
An economic model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified, often mathematical, framework designed to illustrate complex processes. Frequently, economic models posit structural parameters. [1]