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Unformatted text preview: Quantitative Analysis BA 452 Homework 3 Questions Homework 3 covers the theory and applications in Lessons I6 and I7. This document has four parts: Objectives of doing your homework. Assignment of homework questions, with suggestions about which other questions may help you understand the homework questions. Homework 3 Supplemented Questions listing 32 questions: 4 of them are your homework, others may help you understand the homework questions, and the rest may help you understand fine points. Some supplemental questions refer to a section of a chapter in the textbook (for example, Section 2.1 means Chapter 2 Section 1 of your textbook). Homework 3 Supplemented Answers listing answers to all 32 questions excluding your 4 homework questions. Quantitative Analysis BA 452 Homework 3 Questions Objectives By working through the homework questions and the supplemental questions, you will: 1. Understand what happens in graphical solutions when coefficients of the objective function change. 2. Be able to interpret the range for an objective function coefficient. 3. Understand what happens in graphical solutions when righthand sides change. 4. Be able to interpret the dual price. 5. Be able to interpret the range for a righthand side. 6. Learn how to formulate, solve and interpret the solution for linear programs with more than two decision variables. 7. Understand the following terms: sensitivity analysis dual price reduced cost 100 percent rule sunk cost relevant cost Quantitative Analysis BA 452 Homework 3 Questions On the definition of the dual price In this course, I defined 1) the dual price of a constraint is the rate of improvement in the value of the optimal solution per unit increase in the righthandside constant. For example, if a production line is already operating at its maximum 40 hour limit, the dual price would be the maximum price the manager trying to maximize profit or minimize cost would be willing to pay for operating the line for an additional hour, based on the benefits he would get from that change. That definition of dual price is used on all your homework and exams, and is consistent with the definition used in the Management Scientist program and in the Anderson text for editions 12 and earlier. However, the Anderson text for editions 13 and later and answers to some of the supplemental questions below use this altered definition 2) the dual price of a constraint is the rate of change in the value of the optimal solution per unit increase in the righthandside constant. In the case of minimization problems, definition 2) changes the sign of the dual price from definition 1). For example, reconsider a production line that is already operating at its maximum 40 hour limit. Suppose the maximum price the manager would be willing to pay for operating the line for an additional hour is $100. Suppose the objective of the manager is to minimize cost. In that case, operating the line for an additional hour lowers costs by $100. costs by $100....
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 Spring '11
 Various
 Business, Linear Programming, Optimization, Pfeiffer, U.S. Oil

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