Summary of Section 2.3.1

Section 2.3.1 reviews a basic example of constructing an influence chart. The problem for the chart needed (the question it must answer) is to find what the price of a product needs to be in order to gain the maximum profit possible. The first step in the influence chart involves determining the main factor that will indicate the effectiveness of the model. In this chart Profit is the outcome and is marked by a hexagon. Next the Profit outcome is broken down into the two variables that create it. These two variables are Total Revenue and Total Cost. Both variables are identified with a circle. The two variables are then examined to see if they may be broken down even further. In this case Total Cost is broken down into Variable Cost and Fixed Cost. Fixed Costs is identified as a fixed variable denoted by the triangle. Due to the fact that a variable does not influence its value fixed cost never changes. Variable cost is broken down further into quantity Sold and Unit cost. Unit cost is also a fixed variable since the cost of a unit is set and not subject to change with any influencing factors. Unit cost is also represented by the triangle.

Price is a variable of total revenue and is ultimately the decision that needs to be made within the entire chart. Price is then placed inside the square to indicate it as a decision. Lastly elasticity and price are fixed variables of quantity sold. These two factors in combination determine quantity sold.