# Exam 1 Qualitative Questions

List the three ingredients of a simulation model identified in the introductory video for this topic and give an example of each type within the context of inventory management.
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The general purpose of simulation is to build an abstract representation of a real system that you can experiment with in a computer setting. This allows you to assess the effects of policy variables on outcomes in light of random variables on the computer, rather than engage in costly experimentation with the real system itself.
As n increases, the stability of the forecast increases because you hare averaging over more data points. As n decreases, the forecast becomes more responsive to recent changes in demand because of the averaging over fewer demand points. As alpha decreases toward zero, forecasts are more stable because more weight is given to the previous smoothed value and less to the most recent demand. As alpha increases toward one, the forecast become much more responsive to recent demand.