Midterm Review

73-220

Lecture 12

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 Agenda
● Review Last Class
– Network models.
● Midterm review
● Next Class

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 Date, Time, and Place.
● Friday, October 27, 7:00-10:00pm
● Please find your seat number on the course
website.
● TC102 (#1-#125), TC202 (#126-#225)
– You are required to sign in at the beginning of
the exam and sign out before leaving the
room. If you fail to do so, you will assume
the responsibility if your midterm paper is
lost.

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 Format of the Midterm
● You are allowed to bring in one page single-sided-letter-
size aid sheet. There should be no add-on features to your
sheet.
● Stand-along non-programmable calculators are allowed.
● Graphical solution for a 2-variable linear programming
problem.
● Mathematical formulation of linear programming
problems, without solving them.
● Sensitivity analysis of linear programming problems
– Based on Excel sensitivity report.
– Fill in the blanks.
– Interpretation of sensitivity report (Excel).

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 Policies on Midterm
● Exam time includes writing your names. If you are late in
handing in your paper even if due to writing your name
and ID, a penalty will be applied.
● If you cannot write your midterm on the scheduled date,
with sufficient documents handed in to the instructor by
Nov 10, you will be granted a deferred midterm during the
last day of the final exam period (See the receptionist in the
Dean’s suite for details, and an administration fee is
charged for this service). Otherwise, a zero will be assigned
to your midterm component.
● To be fair to all students, the deferred midterm will be
MORE DIFFICULT than the normal midterm as those
who write deferred midterms have more time to review
the material.

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 Graphical Solution
● Know how to draw constraint line and decide which side
is feasible.
● After draw all constraint lines, know how to determine
the feasible region.
● Determine corner points.
● Draw objective function line.
● Move objective function line away or towards the origin,
depending on where your initial objective function line is
and whether this is a minimization or maximization
problem, and then, decide what the optimal solution is.
● Alternative way to determine the optimal solution is to
plug in all the corner points into the objective function
and see which point gives you the optimal value (largest
number for max, and smallest number for min).
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 Important Concepts of LP Models
● Standard form of an LP formulation
– Slack (for < constraints) or surplus (for >
constraints) variables.
● Three types of constraints (>, <, =).
● Linear vs. nonlinear expressions
● Possible outcomes of LP problems
– Which four?
● Feasible solutions vs optimal solution.

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LP Formulation
● Follow the standard procedure.
– Ask what you are deciding.
– Ask what your objective is.
– Ask what the restrictions/requirements are.
● Three components of an LP model
– Decision variables (pay attention to units).
– Objective function (max vs min).
– Constraints
» Limited resources (limitation, <)
» Minimum requirements (>)
» Nonnegativity requirement

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 LP Formulations

● Review the examples we discussed in class and

assignment problems
● Be familiar with typical ways to set up decision
variables, objective function, and constraints
● Modeling is a creative process, critical thinking
are encouraged. If you think the problems do not
give you sufficient assumptions, clearly state your
assumptions.

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 Network Models (Not Covered in
Midterm)
● Decision variables are associated with the
arcs (routes).
● Constraints are associated with the nodes
– Supply restriction, demand requirement,
transshipment product flow.
– For assignment problems, understand the
basics about binary decision variables.

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Sensitivity Analysis &
Interpretation of Solution
● Computer Solution (Excel)
– Sensitivity Report
● Interpretation, Sensitivity Analysis
– Objective Function coeff. - reduced cost
– RHS coeff. - shadow price
– tightening / relaxing constraints
– slack, surplus variables
– 100% rule ( 2 or more obj. func. coeffs. or
RHS coeffs.)
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Sensitivity Analysis: Reduced Cost

● Reduced cost re obj fun coeff.

– Basic vs. non-basic decision variables
– Reduced costs for basic DVs are zeros
– Reduced costs for non-basic DVs
» Max: negative, is the (negative allowable
increase). Allowable decrease is infty
» Min: positive, is the allowable decrease.
Allowable increase is infty.

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 Sensitivity Analysis: Shadow Price

● Shadow prices for constraints:

– Binding or nonbinding constraints
– Shadow prices for nonbinding constraints are 0.
» < constraint: Allowable increase is infty; allowable decrease =
RHS-LHS final value.
» > constraint: allowable increase = LHS final value – RHS;
allowable decrease = infty.
– Shadow prices for binding constraints:
» < constraint: positive for max; negative for min.
» > constraint: negative for max; positive for min.

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Sensitivity Analysis: Obj. Fun.
Coeff.
● Change within the allowable limit
– Nonbasic DVs
» Current optimal solution remains optimal
» OFV remains the same
– Basic DVs
» Current optimal solution remains optimal
» New OFV determined by plugging in the optimal
solution in the new objective function
● Change outside the allowable limit
– Must re-solve.

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 Sensitivity Analysis: RHS of
Constraints
● Change within the allowable limit
– Nonbinding constraints
» Current optimal solution remains optimal
» OFV remains the same
– Binding constraints
» Optimal solution will change
» New OFV = old OFV + change in RHS * shadow
price
● Change outside the allowable limit
– Must re-solve.

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 Multiple Changes: 100% Rule
● Multiple changes at the same time
– Must be the same kind (either all about obj. fun. coeff. or
all about RHS of constraints).
– Determine the percentage of each change (change /
allowable limit), and add them together.
– If the sum is < 100%
» simultaneous changes are re obj fun coeff, optimal solution is
unchanged, new OFV can be determined by plugging in the OS
into the new objective function.
» Simultaneous changes are re RHS of constraints, relevant
shadow prices are valid, can be used to determine the new OFV,
optimal solution may change as long as any of the change is re a
binding constraint.
– If the sum is > 100%
» Must re-solve.

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 Sensitivity Analysis: Other Changes
● Change a coefficient of the LHS of a constraint
– Must resolve
● Add a new constraint
– If the current optimal solution satisfies it, no change;
otherwise, must re-solve.
● Delete a constraint
– If non-binding, no change; otherwise, must re-solve.
● Add a new decision variable
– Must re-formulate, re-solve.

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 Next Class
● Enjoy your review.

● Good luck for your midterm.

● Next class
– Integer programming. Read Chapter 8

YOU LEARN DECISION ANALYSIS BY

DOING DECISION ANALYSIS!!

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