Which statement best describes sensitivity analysis in EA?

Which statement best describes sensitivity analysis in EA?

• A. It is never used in EA.
• B. It is the initial step in EA.
• C. It is used to examine how results change with variations in assumptions.
• D. It only applies to non-monetary factors.

Answer: (C)

The idea you’re being tested on is robustness: sensitivity analysis checks how the results of an EA change when you tweak the input assumptions. In an economic analysis, you build a base model with costs, benefits, and other inputs, then vary these inputs within plausible ranges (like discount rates, cost estimates, or probability of events) to see how outputs such as net present value or benefit-cost ratio respond. This shows which assumptions most influence the outcome and whether the conclusion holds under uncertainty. It isn’t restricted to monetary factors or tied to being the first step; it’s a tool you apply to test how sensitive results are to changes, for both monetary and non-monetary inputs. That’s why the statement describing it as examining how results change with variations in assumptions is the best fit.

The idea you’re being tested on is robustness: sensitivity analysis checks how the results of an EA change when you tweak the input assumptions. In an economic analysis, you build a base model with costs, benefits, and other inputs, then vary these inputs within plausible ranges (like discount rates, cost estimates, or probability of events) to see how outputs such as net present value or benefit-cost ratio respond. This shows which assumptions most influence the outcome and whether the conclusion holds under uncertainty. It isn’t restricted to monetary factors or tied to being the first step; it’s a tool you apply to test how sensitive results are to changes, for both monetary and non-monetary inputs. That’s why the statement describing it as examining how results change with variations in assumptions is the best fit.