CHAPTER 3:

DUAL VALUE - The change in the value of the objective function per unit increase in the right-hand side of a constraint.

OBJECTIVE FUNCTION ALLOWABLE INCREASE (DECREASE)- The allowable increase/decrease of an objective function
coefficient is the amount the coefficient may increase (decrease) without causing any change in the values of the
decision variables in the optimal solution. The allowable increase/decrease for the objective function coefficients can be
used to calculate the range of optimality.

RANGE OF FEASIBILITY - The range of values over which the dual value is applicable.

RANGE OF OPTIMALITY- is the range of values over which an objective function coefficient may vary without causing
any change in the values of the decision variables in the optimal solution.

REDUCED COST- The reduced cost of a variable is equal to the dual value on the nonnegativity constraint for that
variable.

RELEVANT COST- A cost that depends upon the decision made. The amount of a relevant cost will vary depending on the
values of the decision variables.

*When the cost of a resource used is relevant, the dual value can be interpreted as the amount by which the value of the
resource exceeds its cost. Thus, when the resource cost is relevant, the dual value can be interpreted as the maximum
premium over the normal cost that the company should be willing to pay for one unit of the resource.

SENSITIVITY ANALYSIS- is the study of how the changes in the coefficients of an optimization model affect the optimal
solution.

POSTOPTIMALITY ANALYSIS- the analysis does not begin until the optimal solution to the original linear programming
problem has been obtained.

RIGHT-HAND-SIDE ALLOWABLE INCREASE (DECREASE)- The allowable increase (decrease) of the right-hand side of a
constraint is the amount the right-hand side may increase (decrease) without causing any change in the dual value for
that constraint. The allowable increase (decrease) for the right-hand side can be used to calculate the range of feasibility
for that constraint.

SENSITIVITY ANALYSIS- The study of how changes in the coefficients of a linear programming problem affect the optimal
solution.

SUNK COST- A cost that is not affected by the decision made. It will be incurred no matter what values the decision
variables assume.

*When the cost of a resource is sunk, the dual value can be interpreted as the maximum amount the company should be
willing to pay for one additional unit of the resource.

DEGENERACY- can cause a subtle difference in how we interpret changes in the objective function coefficients beyond
the endpoints of the range of optimality. Degeneracy occurs when the dual value equals zero for one of the binding
constraints. Degeneracy does not affect the interpretation of changes toward the interior of the range of optimality.

SIMULTANEOUS CHANGES- The range of optimality for objective function coefficients is only applicable for changes
made to one coefficient at a time. All other coefficients are assumed to be fixed at their initial values. If two or more
objective function coefficients are changed simultaneously, further analysis is necessary to determine whether the
optimal solution will change.