Lecture 8 - Scarce resources and linear programming

Question 1

Methods of solving problems involving scarce resources

Answer 1

One scarce resource - Maximise the contribution per unit of limiting factor

More than one scarce resource but only two products manufactured - Use linear programming graphical method

Question 2

Linear programming

Answer 2

Assumes linear relationships in the use of resources

All use same amount of resources
Contribution the same regardless of quantity produced

Resources infinitely divisible

Question 3

Linear programming 6 steps

Answer 3

1. Define variables
2. Establish constraints
3. Define objective function
4. Graph constraints to find feasible region
5. Add iso - profit line
   6 Find optimal solution

Question 4

Assumptions of linear programming

Answer 4

Linear relationships between variables
No interdependency of demand
No relationships between the input factors
Constraints cannot be relaxed

Question 5

Limitations of linear programming

Answer 5

The solution is only optimal for the available input data
May be difficult to quantify costs and benefits