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System analysis helped to divide an economical system of dairy herd into two components of: revenues and costs, each of which could be sub-divided into other elements. In the next stage, use of models as well as computer programming led to simulation of a bio-economical situation. Based on such a simulation, revenues and costs of production system were related in a way that change in any factor led to change in other factors and finally to dynamic economical productivity index and vice versa. The sensitivity of system performance toward change in each factor was studied, taking into account different quantities of any of the parameters in the model. Among costs, any change in feed costs with priority given to the price of concentrate, was more important that any other factor in the productivity index. 83.81% increase in feed costs, 225.10% in roughage price and 133.84% in the price of concentrate, tend to decrease productivity index by 36.64% getting it close to 1. A 32.84% increase in milk production, 42.93% increase in basic price of milk, or 39.56% simultaneous increase in basic revenue of milk as well as extra payments due to any percentage of extra fat and protein, increases the productivity index by 36.64%, compensating the negative effect of above mentioned prices. Furthermore, the effect of change in replacement cost, sundry costs, total cost, milk revenue, calf revenue, manure revenue, total revenue, on productivity index was studied