Quants, March 6 2012 Chapter 6 Beginning
Decision Making under Uncertainty
Will be looking at:
1) Criteria
2) Probabilities
3) Multi-stageImpact decisions as you go
4) Risk
5) Value of Information
6) Bayes Rule (Bayesian Revision) How things changed based
Hypothesis Testing
Main activities of inferential statistics
1) Estimate a population parameter
2) Test a hypothesis or claim about a population parameter
Objective: Conduct hypothesis tests for claims made about
1) A population proportion p
2) A populati
Linear ProgramingAllocation of scarce resources
We want to optimize allocation of our scarce resources
Maximization of profit ~ Solution subject to our constraints
1) Decision variables
2) Objective function Max (Min)
3) Constraints
b) Non-negativity cons
MB
RB
Profit per Bike
15
Constraints
Max assembly
Max Finish
2
Number to Produce
1
3
4
Total Production
Profit
Total Profit
10
1
1
15
10
25
Go to Solver under data
Solver Parameters box pops up
Under Set Target Sells $D$14
Set to Max
By changing Cells:
$c
Simplex & Solver Practice & Solution
We make 2 dollars profit on product A, 3 dollars on a second product B and 5 dollars profit on a third product C.
Product C uses 3 units of raw material X, B uses 2 units as does A, we have 100 units available. Product
Max
Basic
XP
Price
600
1200
Constraints
Labour
Cost
Parts
300
450
150
225
Manufacture time
Test Time
5
1
6
2
Manufacturing
Testing
10000
3000 (hours)
11
15
a
Let X1 be the number of basic modesl
Let X2 be the number of XP modesl
Find X1 and X2
Maximize pr