Dynamic Programming is sequential decision-making technique. It is a recursive technique we come from the final stage to initial stages. A decision taken at one stage influences the decision in other stages. The technique is useful in a large number of multi-period business problems.
Terms in Dynamics Programming:
Stage: Period or logical subproblems.
State variables: Possible beginning situations or conditions.
Decision variables: Alternatives that exist at each stage.
Decision criterion: Statement concerning objectives of the problem.
Optimal policy: A set of decision rules developed as a result of decision criterion that gives optimal decisions.