Why Is Sensitivity Analysis Less Realistic Than Monte Carlo Simulation

question 20

Essay

Why is sensitivity analysis less realistic than Monte Carlo Simulation?

---

Definitions:

Maximizing Utility

The economic principle that individuals seek to achieve the highest level of satisfaction possible from their consumption of goods and services, given their income and the prices of those goods and services.

Marginal Rate

The rate at which one variable changes with respect to a minute increase in another variable, often used in the context of marginal tax rates or marginal rates of substitution in economics.

Market Basket A

A selected set of goods and services used to monitor changes in price levels over time, often for the purpose of calculating inflation.

Utility Maximizing

The act of choosing the combination of goods and services that maximizes a consumer's satisfaction or happiness with a given income.