NAME: MOHAMMAD ZAID AKRAM

ROLL NO: 30

SUBJECT: OPERATIONS RESEARCH

PAPER CODE: MBA (IB) CP- 202

MID-TERM ASSIGNMENT-I
Q.1
A- SHADOW PRICE
In a business application, a shadow price is the maximum price that
management is willing to pay for an extra unit of a given limited resource.For
example, if a production line is already operating at its maximum 40 hour limit,
the shadow price would be the maximum price the manager would be willing to
pay for operating it for an additional hour, based on the benefits he would get
from this change.
For maximization problems like this one the constraints can often be thought of
as restrictions on the amount of resources available, and the objective can be
thought of as profit. Then the shadow price associated with a particular
constraint tells you how much the optimal value of the objective would increase
per unit increase in the amount of resources available. In other words, the
shadow price associated with a resource tells you how much more profit you
would get by increasing the amount of that resource by one unit.

B- NON BASIC VARIABLE

So, the basic variables can be defined as the m variables which can take any
value other than zero. Moreover, if the variables satisfy the non-negativity
condition of the LP model, the basic solution created by them is called the basic
feasible solution. The remaining variables are known as the non-basic variables.

C- ARTIFICIAL VARIABLE
When the problems related to the mixed constraints are given and the simplex
method has to be applied, then the artificial variable is introduced. The artificial
variable refers to the kind of variable which is introduced in the linear program
model to obtain the initial basic feasible solution. It is utilized for the equality
constraints and for the greater than or equal inequality constraints.
D- FEASIBLE SOLUTION
A feasible solution is a set of values for the decision variables that satisfies all of the
constraints in an optimization problem. The set of all feasible solutions defines
the feasible region of the problem. Most optimization algorithms operate by first
trying to locate any feasible solution, and then attempting to find another (better)
feasible solution that improves the value of the objective function. This process of
trying to find improving feasible solutions repeats until either no further
improvement is possible or some other stopping criteria is met.

E- OPTIMAL SOLUTION
An optimal solution is a feasible solution where the objective function reaches
its maximum (or minimum) value – for example, the most profit or the least cost.
A globally optimal solution is one where there are no other feasible solutions
with better objective function values. A locally optimal solution is one where
there are no other feasible solutions “in the vicinity” with better objective
function values – you can picture this as a point at the top of a “peak” or at the
bottom of a “valley” which may be formed by the objective function and/or the
constraints.