Week 5 - Sensitivity Analysis

Question 1

Final value in a sensitivity report

Answer 1

This is the optimal value of decision variables and constraints

Question 2

Reduced cost on a sensitivity report

Answer 2

This is how much the objective coefficient needs to be reduced for a nonnegative variable that is zero in the optimal solution to become positive

Question 3

Allowable increase and decrease in a sensitivity report:
- Definition
- Example

Answer 3

• These values show how much an objective function coefficient before the values of the decision of the decision variables will change
• For example, if allowable increase for product B is 10 the allowable decrease is 90 then if unit profit for product (65) increase by more than 10 or decreases by more than 90 then the optimal values will change

Question 4

Shadow price in a sensitivity report (3)

Answer 4

• Shows how much the value of the objective function will change as the right hand side of a constraining is increased by 1
• Shadow price is zero when there is spare capacity
• Shadow price represents the economic value of having an additional unit when a constraint involves a limited resources

Question 5

Shadow price example

Answer 5

If the shadow price of the finishing constraint is 45 this means that if an additional hour of finishing time is available the profit will change by £45

Question 6

Limits report

Answer 6

Shows the lower and upper limit that each variable can assume while satisfying all constraints and holding all other variables constant