{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

hw03a_2008 - UNC-Wilmington Department of Economics and...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
UNC-Wilmington ECN 321 Department of Economics and Finance Dr. Chris Dumas Homework 3 Solutions 1) This problem shows that a change in the objective function alone can change the solution to a problem. This problem provides an example of doing a sensitivity analysis to the parameters in the objective function —we change the value of one of the parameters in the objective function and find the effects on model results. Identify the choice variables: M = number of mixed drinks per customer B = number of beers per customer Set up the optimization problem: max U = 4M + 1B M,B Subject to: M ≥ 0 Constraints re-written B ≥ 0 in “graphing form:” 3M + 2B ≤ 10 M = 3.33 – (2/3)B 3M + 1B ≤ 6 M = 2 – (1/3)B Graph the constraints: Finding the coordinates of this Extreme Point. 3.33 – (2/3)B = 2 – (1/3)B 1.33 = (1/3)B B = 4 M = 2 – 1/3 4 = 2/3 Feasible Region The Feasible Region is convex; hence, the optimal feasible solution will occur at an extreme point. Construct table of extreme points: B M U = 4M + 1B 0 0 0 0 2 8 4 2/3 6 2/3 5 0 5 Identify the solution: Maximum of U = 8 B = 0, M = 2) is the solution. When the customer’s preference for beer decreased , the customer's objective function changed. As a result, the solution to the problem changed such that the customer now buys less beer and more mixed drinks (relative to the solution of (B = 4, M = 2/3) in the original problem in the handout).
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern