Final answer:
In sensitivity analysis, one input factor is changed at a time to determine its effect on the project's expected outcome. Economists analyzing markets follow a step-by-step approach, first creating a demand and supply model, then identifying if changes affect demand or supply.
Step-by-step explanation:
When performing sensitivity analysis to evaluate project risk, you would change one input factor at a time in the model to assess its impact on the expected outcome. This approach allows for a clear understanding of how each variable independently affects the results.
To evaluate the effect of input factors on the market using economic models, economists typically conduct an analysis that involves multiple steps. Step 1 is to draw a demand and supply model before the economic changes occur, making note of the law of demand and supply, as well as the shifting variables for both. Step 2 involves deciding whether the economic change affects demand or supply, determining if the event relates to something listed as demand factors or supply factors. By assessing one change at a time, economists can more accurately deduce the effect of individual factors on market dynamics, even when multiple factors are changing simultaneously.