Graphical Method Sensitivity Analysis (RHS) Right-Hand Side Ranging

and Computer Solution Sensitivity Analysis

 Involves how many additional units of the
(RHS) resource can be added or subtracted before the
Sensitivity Analysis shadow price changes. It is the process of finding
 Allows to determine how sensitive the optimal the range of applicability or range of feasibility of
solution is to changes in data values shadow prices.
 Involves an analysis on the effect of change in  After adding (or subtracting) to the RHS, resolve for
one or more parameters or variables defining a LP the optimal solution in terms of the same two binding
mode (Optimality analysis) constraints.
 Recognizes the fact that management operates in Graphical Method (Continuation)
a dynamic environment. Sensitivity analysis allows Steps Needed When Changing the RHS
a manager to ask certain what if questions about  Draw the expanded part of the feasible region
the problem then identify the extreme points
 Change in costs, prices, and the availability of  With the enlarged or expanded feasible region,
resources are possible and that technological determine the change in the value of the optimal
advances affecting production processes may occur solution/function.
any time.  Determine the dual value or shadow price by
Right Hand Side (RHS) subtracting the original final value of the optimal
solution/objective function & the new final value
 Maximum or minimum amount of resources/ of the optimal solution.
requirements in the constraints of an LP problem  The change in the value of the optimal solution
per unit increase in the righthand side of the
Graphical Method
constraint is called the dual value/shadow price.
Steps Needed When Changing the RHS
 Determine the feasible region of the LP problem
 Identify the optimal solution based the feasible
region graphically together with the maximum
profit/minimum cost.

Shadow Price or The Dual Value.

 The improvement in the value of the optimal

solution per unit increase (or decrease) in the
right-hand side

Graphically, a shadow price is determined by

 Adding +1 (or -1) to the right-hand side value of

the requirement or resource being evaluated.

Aaaaaa
An increase of 1 on RHS of Constraint 1 changes the
optimal solution to 13000. The shadow price increase
made is 13000- 12650 = 350.
Steps  The manufacturer should not pay more than
₱350/ton for and additional unit of Raw material
 Find the intercepts to plot a new line in the feasible A
region.

What is the extent or range of increasing or

decreasing the RHS?

 The range of feasibility is the range over which the

 Resolve for the value of x & y or the decision shadow price/dual value is applicable. (or allowable
variables graphically or using elimination method increase or decrease in the constraint)
or other methods
 Resolve the maximum profit/minimum cost
 Solve the shadow price/dual value as a basis for
sensitivity analysis. Use the formula:

Profitnew - Profitold
Sensitivity Analysis (Graphical) : Effects of changing
RHS

 Graphically, the range of feasibility is determined by

finding the values of right-hand side coefficient
such that the same two lines (two binding
constraints) that determined the original optimal
solution continue to determine the optimal
solution for the problem and resolving the values
for the decision variables.
(Refer to Module 4 Part 1): [c1a, c1b] and [c2a,
c2b].
 An increase of 1 ton for Raw Material A will cause
a change in the value of the optimal solution or  As the RHS increases, other constraints will become
objective function. binding and limit the change in the value of the
 Hence, there will be an increase of profit of objective function.
₱13,000 - ₱12,650 = ₱350.
Implication of the Binding & non-binding constraints
 This indicates the change in the optimal objective
Binding Constraint
value per unit change in the availability of the
resource (Raw material A). It provides a direct link  Changing the constraint also change the optimal
between the model input (resources) and its solution.
output (total profit).  Tightening the binding constraints can worsen
 The change in the value of the optimal solution the objective function value & loosening it can
per unit increase in the right-hand side of the improve the objective function value
constraint is called the dual value or shadow  Hence, once the optimal solution is found,
price. managers can seek to improve the solution by
 It also represents the unit worth of a resource finding ways to relax the constraints.
(₱350/ton).
 This means that a unit increase (or decrease) in Non-Binding Constraint
Raw
 Constraints that do not affect the optimal
Material A capacity will increase (or decrease)
solution.
profit by ₱350.
Constraints & Shadow Prices

Binding Constraint
 Has a non-zero value.
Non-Binding Constraint
 Has a value of zero
Negative Shadow Price
 Objective function will not improve if the RHS is
increased

Example 2: Minimization (Graphical)

 In sensitivity analysis using computer solution using

excel solver just like in graphical method, the
Example 2: Minimization (Graphical Sensitivity shadow price/dual value plays a significant role
Analysis) in the change of the optimal value of the
solution.
 The dual value/shadow price associated with a
constraint is the change in the optimal value of
the solution per unit increase in the right-hand
side of the constraint.
 Thus, the shadow price/dual values of ₱333.33 for
raw material A and ₱1333.33 for raw material B
tell us that an additional unit of RM A increases
the value of the optimal solution by ₱333.33, and
an additional unit of RM B increases the value of
the optimal solution by ₱1333.33.
 As in graphical method, they also represent the
unit worth of a resource (₱333.33/ton of RM A &
₱1333.33/ton of RM B). This means that a unit
Minimum Cost = ₱8(2.25) + 12(2.25) = ₱45
increase (or decrease) in Raw Material A &
Shadow price = Costnew – Costold
capacity will increase (or decrease) profit by
= ₱45 - ₱48= -₱3.00
₱333.33 & ₱1333.33 respectively

 A decrease of 1 unit for Material 2 will cause a What is the extent or range of increasing or
change in the value of the optimal solution or decreasing the RHS?
objective function.  RM A > 4 to 7 units (allowable change of
 Hence, there will be a decrease of cost of ₱3.00. RHS)
 It also represents the unit worth of a resource  RM B > 6 to 12 units (allowable change of
(₱3/unit). RHS)
 This means that a unit increase (or decrease) in What will happen to optimal solution if the
Material 2capacity will increase (or decrease) cost RHS of RM B will be increased by 3 units?
by ₱3.00.  Since 3 is within the allowable increase for
Example 1: Computer Solution (Using Solver) RM B then the shadow price will apply.
 Hence, the change in profit = 3 x ₱1333.33 =
₱3999.99 and this implies in the change of
optimal profit: ₱12,666.667 + ₱3999.99 = ₱
 16,666.66 the profit has been increased to  That the shadow price of binding constraints is
₱3999.99 since there was also an increase of 3 non-zero & the shadow price of the non-binding
units in the RHS of RM B. constraints are both 0.
NOTE:  The dual values of zero show that additional units
 That if the change in the RHS of the evaluated of these two resources will not improve the value
resource is within the range of feasibility, the of the objective function.
corresponding shadow price will apply.
 If the proposed change exceeds the range,
the shadow price will no longer be valid.

 The binding constraints (RM A & RM B) have a slack

of zero, indicating that all resources have been used
Slack and Non-Slack Constraints
Slack
 All resources have been used. LHS = RHS
Non- Slack/ Surplus
 Implies unused resources or capacity. LHS < RHS

 The binding constraints (Mat. 1 & Mat 2) have a

slack of zero, indicating that all resources have been
used.
 Meanwhile Mat. 3 has a slack of 4 which implies
unused resources or capacity for Mat. 3

NOTE:
 to allowable changes must be within or less than
100%, Hence we call this as the 100% RULE.
What is the extent or range of increasing or
decreasing the RHS?
Range of Feasibility:
 Material 1: 5 to 11
 Material 2: 9 to 18

What will happen to optimal solution if the RHS of Change in Objective Function Coefficient
Material 1 will be increased by 2 units?
 Since 2 is within the allowable increase for
Material 1 then the shadow price will apply.
Hence, the change in cost = 2 x ₱2.00 = ₱4 and this
implies in the change of optimal cost:
₱48 + ₱4 = ₱52 the cost has been increased to ₱52
since there was also an increase of 2 units in the
RHS of Material 1.

NOTE:
 It must be noted that if the change in the RHS of
the evaluated resource is within the range of
feasibility, the corresponding shadow price will
 The sum of the two proposed ratios is 0.70 or 70% <
apply.
100%, which means the optimal solution remains
 If the proposed change exceeds the range, the
optimal & valid but will cause a change in the
shadow price will no longer be valid. final profit.
 Profit will be: ₱3300(3.33) + ₱1800(1.33) = ₱13,383
or we can resolve this using excel solver.
Limitations of Classical Sensitivity Analysis
 Meanwhile, if the sum of the two ratios > 100%
Classical sensitivity analysis provided by most computer
then the optimal solution may no longer be valid
packages does have its limitations
 Simultaneous changes in input data
Change in Input Data
 Changes in constraint coefficients
 Non-intuitive dual values

Simultaneous Changes in Input Data

 The sensitivity analysis information in computer

output is based on the assumption that only one
coefficient changes:
 It is assumed that all other coefficients will remain
the same. Thus, the range analysis for the
objective function coefficients is only applicable
for changes in a single coefficient.
 In many cases, however, we are interested in what
would happen if two or more coefficients are  The sum of the two proposed ratios is 100% or
changed within the 100% rule, which means the shadow
simultaneously. price will still be valid.
 Meanwhile, if the sum of the two ratios > 100%
∑ ❑ proposed change <100 % then the shadow price may no longer be valid
allowable increase Changes in Constraint Coefficients
 The formula suggests that the sum of the ratios of
the proposed changes of the coefficients or RHS
 Classical sensitivity analysis provides no
information about changes resulting from a
change in the coefficient of a variable in a
constraint. Instead, we must simply change the
coefficient and rerun the model/solver.
 2x + y ≤ 8  1.75x + y ≤8 then input this change to
solver, it will generate a report which indicates a
change in the value of x & y as well as the value
of the total profit

Limitations of Classical Sensitivity Analysis

 Constraints with variables naturally on both the
left-hand and right-hand sides often lead to dual
values that have a non-intuitive (not easily
understood) explanation.