Notes by: Ms.

Rupali Lamba

Sensitivity analysis

Sensitivity analysis involves 'what if?' questions. In the real world, the situation is
constantly changing like change in raw material prices, decrease in machinery availability,
increase in profit on one product, and so on. It is important to decision makers for find out
how these changes affect the optimal solution. Sensitivity analysis can be used to provide
information and to determine solution with these changes. Sensitivity analysis deals with
making individual changes in the coefficient of the objective function and the right hand sides
of the constraints. It is the study of how changes in the coefficient of a linear programming
problem affect the optimal solution.

We can answer questions such as,

 How will a change in an objective function coefficient affect the optimal solution?
 How will a change in a right-hand side value for a constraint affect the optimal
solution?

For example, a company produces two products x1 and x2 with the use of three different
materials 1, 2 and 3. The availability of materials 1, 2 and 3 are 175, 50 and 150 respectively.
The profit for selling per unit of product x1 is ` 40 and that of x2 is ` 30. The raw material
requirements for the products are shown by equations, as given below.

Zmax = 40x1 + 30x2

Subject to constraints

4x1 + 5x2 ≤ 175 (a)

2x2 ≤ 50 (b)
6x1 + 3x2 ≤ 150 (c)
where x1, x2 ≥ 0
The optimal solution is
x1 = ` 12.50
x2 = ` 25.00
Zmax = 40 × 12.50 + 30 × 25.00
= ` 1250.00
 Notes by: Ms. Rupali Lamba

Change in Objective Function Coefficients and Effect on Optimal Solution

Referring to the current objective coefficient, if the values of the objective function
coefficient decrease by 16 (Min. obj. coefficient) and increase by 20 (Max. obj. coefficient)
there will not be any change in the optimal values of x1 = 12.50 and x2 = 25.00. But there
will be a change in the optimal solution, i.e. Zmax.

n there is a change in any one of the coefficients of variables i.e., x 1 or x2. Simultaneous changes in values of the coefficients need to apply for 100 Percent Rule for o

For x1, Allowable =C Current value – Min. Obj.

decrease coefficient
=
40 – 24
= 16 (a)
Allowable = Max. Obj. coefficient – Current
increase value
= 60 – 40
= 20.00 (b)
For x2, Allowable = 10.00 (c)
decrease
Allowable = 20.00 (d)
increase

For example, if coefficient of x1 is increased to 48, then the increase is 48 – 40 = 8.00 from
(b), the allowable increase is 20, thus the increase in x 1 coefficient is 8/20 = 0.40 or 40%.

Similarly,

If coefficient of x2 is decreased to 27, then the decrease is 30 – 27= ` 3.00.

From (c), the allowable decrease is 10, thus the decrease in x2 coefficient is 3/10 =
0.30 or 30%.
 Notes by: Ms. Rupali Lamba

Therefore, the percentage of increase in x1 and the percentage of decrease in x2 is 40 and 30

respectively.

i.e. 40% + 30% = 70%

For all the objective function coefficients that are changed, sum the percentage of the
allowable increase and allowable decrease. If the sum of the percentages is less than or equal
to 100%, the optimal solution does not change, i.e., x1 and x2 values will not change.

But Zmax will change, i.e,

= 48(12.50) + 27(25)

= ` 1275.00

If the sum of the percentages of increase and decrease is greater than 100%, a different
optimal solution exists. A revised problem must be solved in order to determine the new
optimal values.

Change in the Right-hand Side Constraints Values and Effect on Optimal Solution

Suppose an additional 40 kgs of material 3 is available, the right-hand side constraint

increases from 150 to 190 kgs.

Now, if the problem is solved, we get the optimal values as x 1 = 23.61, x2 = 16.11 and Zmax
= 1427.78

From this, we can infer that an additional resources of 40 kgs increases the profit by =
1427.78 –1250 = 177.78

Therefore, for one kg or one unit increase, the profit will increase by

= 177.78/40

= 4.44

Dual price is the improvement in the value of the optimal solution per unit increase in the
right- hand side of a constraint. Hence, the dual price of material 3 is 4.44 per kg.

Increase in material 2 will simply increase the unused material 2 rather than increase in
objective function. We cannot increase the RHS constraint values or the resources. If the limit
increases, there will be a change in the optimal values.

For example, for material 3, the dual price 4.44 applies only to the limit range 150 kgs to
262.50 kgs.
 Notes by: Ms. Rupali Lamba

Where there are simultaneous changes in more than one constraint RHS values, the 100 Per
cent Rule must be applied.

Reduced Cost
Cost of consumed Profit per unit of activity
Reduced cost/unit of activity=
resources per unit of activity

If the activity's reduced cost per unit is positive, then its unit cost of consumed resources is
higher than its unit profit, and the activity should be discarded. This means that the value of
its associated variable in the optimum solution should be zero.

Alternatively, an activity that is economically attractive will have a zero reduced cost in the
optimum solution signifying equilibrium between the output (unit profit) and the input (unit
cost of consumed resources).

In the problem, both x1 and x2 assume positive values in the optimum solution and hence
have zero reduced cost.

Considering one more variable x3 with profit 50

Zmax = 40x1 + 30x2 + 50x3

Subject to constraints,

4x1 + 5x2 + 6x3≤ 175 (a)

2x2 + 1x3 ≤ 50 (b)
6x1 + 3x2 + 3x3 ≤ 150 (c)
Where x1, x2, x3 ≥ 0
The reduced cost indicates how much the objective function coefficient for a particular
variable would have to improve before that decision function assumes a positive value in the
optimal solution.

The reduced cost of 12.50 for decision variable x 2 tells us that the profit contribution would
have to increase to at least 30 + 12.50 = 42.50 before x 3 could assume a positive value in the
optimal solution.