COMMERCE 3QA3 Study Guide - Midterm Guide: Shadow Price, Feasible Region, Profit Margin

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 3QA3
• Professor: John Miltenburg

Document Summary

Formulation solution interpretation and sensitivity analysis. Basic assumptions of linear programming certainty, proportionality, additivity and divisibility. Nonnegativity mean that decision values (cid:272)a(cid:374)"t have (cid:374)egative values. Feasible region on an lp problem consists of those points that simultaneously satisfy all constraints in the problem. Redundant constraints: one that does not affect the feasible solution region. Infeasibility: condition that arises when no single solution satisfies all of a(cid:374) lp"s pro(cid:271)le(cid:373) (cid:272)o(cid:374)strai(cid:374)ts no feasible region exists. Alternate optimal solutions : ex. more than one solution (all have the same slope) When the solution is unbounded in a maximization problem, the objective function value can be made infinitely large without violating any constraints. Lhs constraints are shaded blue - if rhs has the constraint vs the constant, it is then blue. Profit margin = actual costs * units needed. Marginal cost= shadow price of each factor * units needed.