COMMERCE 3QA3 Final: Final Exam Crib Sheet

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

Document Summary

Sensitivity analysis - gives ranges of values of the objective function coefficients and the constraint rhs over which the optimal solution does not change. Sensitivity analysis for constraints: binding or nonbinding, slack or surplus for a constraint. Shadow price for a non-negativity constraint (= reduced cost for a decision variable: range of feasibility for the right-hand-side (rhs) of a constraint, range of optimality for the coefficient of a decision variable in the objective function. Case 1: all constraints whose rhs values are being changed are nonbinding. Case 2 (most common): at least one constraint whose rhs value is being changed is binding (i. e. has non-zero shadow price or zero slack / surplus). Then all information in the answer report and. If constraint is not binding", slack or surplus 0. If constraint is binding", slack or surplus = 0. The shadow price for a binding constraint 0.