Quantitative Analysis for Business Decisions MID exam

Short Answers

1. What is Qualitative Analysis? Qualitative analysis focuses on understanding the why

behind decisions. It involves non-numerical data such as opinions, interviews, and
observations to gain insights into motivations, behaviors, and attitudes.

2. Define Problem Solving. Problem-solving is the process of identifying a challenge,

analyzing its causes, developing potential solutions, evaluating those solutions, and
implementing the most effective one.

3. List out the phases of OR problem? The typical phases of an Operations Research
(OR) problem include:

o Problem Definition

o Model Formulation

o Solution Derivation

o Model Validation

o Implementation of the Solution

4. Define Linear Programming Problem. A Linear Programming Problem (LPP) is an

optimization technique used to find the best outcome (maximum profit or minimum
cost) from a mathematical model whose requirements are represented by linear
relationships.

5. Why does the Hungarian method is used in Assignment? The Hungarian method is
specifically used in assignment problems because it efficiently finds the minimum
cost or maximum profit assignment of tasks to agents (or resources to activities) by
exploiting the concept of opportunity costs and reducing the cost matrix.

6. What is Graphical method LPP? The graphical method is a way to solve LPPs with
two decision variables. It involves plotting the constraints as lines on a graph to
define a feasible region, and then finding the optimal solution by identifying the
corner point of this region that maximizes or minimizes the objective function.

7. Define Infeasible solution. An infeasible solution is a situation in an optimization

problem where no solution satisfies all the given constraints simultaneously. The
feasible region is empty.

8. Define unbounded solution. An unbounded solution in an LPP occurs when the value
of the objective function can increase (for maximization) or decrease (for
minimization) indefinitely without violating any of the constraints. The feasible
 region is open and extends infinitely in the direction of improving the objective
function.

9. What is the main objective of Travelling Salesman Problem? The main objective of
the Travelling Salesman Problem (TSP) is to find the shortest possible route that visits
each city exactly once and returns to the starting city.

10. Define Duality principle. The duality principle in linear programming states that
every LPP (the primal problem) has a corresponding dual problem. The optimal
solution of the dual problem provides valuable insights into the optimal solution of
the primal problem, including the shadow prices of the resources.

11. What is Decision making? Decision making is the process of identifying and choosing
among alternative courses of action in order to solve a problem or achieve a desired
outcome.

12. Define Operation Research. Operations Research (OR) is a scientific approach to

decision making that seeks to determine how best to design and operate a system,
usually under conditions requiring the allocation of scarce resources. It employs
techniques from mathematics, statistics, computer science, and engineering to
analyze complex problems.

13. What is Artificial variable? An artificial variable is a temporary variable added to the
constraint equations (especially of the "greater than or equal to" or "equal to" type)
in the standard form of an LPP to obtain an initial basic feasible solution for the
simplex method. These variables are penalized in the objective function to drive
them out of the optimal solution.

14. Define Optimality. Optimality refers to the state of having found the best possible
solution to a problem, given the constraints and the objective function. In an LPP, it
means reaching the maximum profit or minimum cost.

15. What is an objective function? An objective function is a mathematical expression in

an optimization problem that defines the quantity to be maximized or minimized
(e.g., profit, cost, time). It is a function of the decision variables.

16. What is an Assignment problem? An assignment problem is a special type of linear

programming problem where the objective is to assign a number of tasks to an equal
number of agents (or resources) at a minimum cost or maximum profit, such that
each agent is assigned to exactly one task and each task is performed by exactly one
agent.

17. Define Decision making. This is a repetition of question 11. The definition remains
the same: Decision making is the process of identifying and choosing among
alternative courses of action in order to solve a problem or achieve a desired
outcome.
 18. Define simplex method. The simplex method is an iterative algebraic procedure used
to solve linear programming problems. It starts with an initial basic feasible solution
and systematically moves from one basic feasible solution to another, improving the
value of the objective function at each step until an optimal solution is reached.

19. Define model. A model is a simplified representation of a real-world system or

situation. It captures the essential aspects of the system under study and is used for
analysis, prediction, and decision making.

Long Answers

1. Explain the process for developing an operation research model? Developing an

Operations Research (OR) model is a crucial step in applying OR techniques. The
process typically involves the following stages:

o Problem Definition: Clearly understanding and defining the problem is the

first and most critical step. This involves identifying the objectives,
constraints, decision variables, and the scope of the problem. It requires close
interaction with the stakeholders and a thorough understanding of the
system being studied.

o Model Formulation: This stage involves translating the defined problem into
a mathematical model. This includes:

▪ Defining the decision variables that represent the choices to be made.

▪ Formulating the objective function as a mathematical expression of

the goal (to be maximized or minimized) in terms of the decision
variables.

▪ Establishing the constraints as a set of linear or non-linear inequalities

or equalities that represent the limitations or requirements of the
system.

o Data Collection: Accurate and relevant data are essential for building and
solving the model. This involves gathering information on parameters,
coefficients in the objective function and constraints, and any other necessary
inputs. The quality of the solution heavily depends on the accuracy of the
data.

o Model Solution: Once the model is formulated and the data are collected, the
next step is to find the optimal or best possible solution. This involves using
appropriate OR techniques, such as linear programming algorithms (simplex
method), network analysis, simulation, etc., depending on the type and
complexity of the model.
 o Model Validation: Before implementing the solution, it's crucial to validate
the model to ensure it accurately represents the real-world system. This
involves testing the model with historical data, comparing its output with
actual outcomes, and getting feedback from stakeholders. Sensitivity analysis,
which examines how changes in input parameters affect the solution, is also
an important part of validation.

o Implementation of the Solution: The final stage involves putting the solution
into practice. This requires clear communication of the findings to the
decision-makers, developing procedures and guidelines for implementation,
and often training the personnel involved.

o Monitoring and Evaluation: After implementation, it's important to monitor

the performance of the solution and evaluate its impact. This helps in
identifying any deviations from the expected outcomes and making necessary
adjustments to the model or its implementation.

2. Outline the general principles used in model building within the context of OR.
Briefly explain the scientific method in OR. General principles used in model
building within OR include:

o Simplification: Models are simplified representations of reality, focusing on

the most relevant aspects of the problem. Unnecessary complexities are
often omitted to make the model tractable.

o Abstraction: Models use symbols and mathematical relationships to

represent real-world entities and their interactions. This abstract
representation allows for logical analysis and manipulation.

o Idealization: Models often make certain assumptions or idealizations about

the system to facilitate analysis. It's important to be aware of these
assumptions and their potential impact on the model's validity.

o Representation: A good model accurately represents the key components,

relationships, and constraints of the system under study.

o Tractability: The model should be solvable using available techniques and

computational resources within a reasonable timeframe.

o Validity: The model should be a valid representation of the real-world system

for the purpose it is intended. It should be able to provide meaningful and
accurate insights or predictions.

The scientific method in OR provides a structured approach to problem-solving. It generally

involves the following steps:
 o Observation: Identifying and defining the problem or opportunity that needs
to be addressed. This involves gathering initial information and understanding
the context.

o Problem Definition: Clearly and concisely stating the problem, including the
objectives, constraints, and variables involved.

o Hypothesis Formulation: Developing potential solutions or courses of action

(hypotheses) to address the problem. In OR, this often involves formulating a
mathematical model.

o Experimentation and Data Collection: Gathering relevant data and testing

the formulated model or potential solutions. This might involve collecting
historical data, conducting simulations, or performing experiments.

o Analysis and Interpretation: Analyzing the data obtained from

experimentation or the model's output to evaluate the different hypotheses
or solutions. This often involves using mathematical and statistical
techniques.

o Conclusion and Recommendation: Based on the analysis, drawing

conclusions about the effectiveness of the different solutions and
recommending the best course of action to the decision-makers.

o Implementation and Evaluation: Putting the recommended solution into

practice and monitoring its performance to ensure it achieves the desired
outcomes. Feedback from implementation may lead to further observation
and refinement of the model or solution.

3. Explain briefly about Nature and scope of Operation Research. Nature of Operation
Research:

o Interdisciplinary Approach: OR draws upon knowledge and methodologies

from various disciplines such as mathematics, statistics, economics,
engineering, computer science, and behavioral sciences. This allows for a
holistic view of complex problems.

o Systems Perspective: OR emphasizes analyzing problems from a system-wide

perspective, considering all interacting components and their relationships
rather than focusing on isolated parts.

o Scientific Method: As discussed earlier, OR employs the scientific method,

using observation, formulation, modeling, experimentation, and analysis to
find optimal solutions.
 o Quantitative Analysis: OR relies heavily on quantitative techniques and
mathematical modeling to represent problems and derive solutions. This
involves using numerical data and mathematical relationships.

o Optimization: A primary goal of OR is to find the best possible (optimal)

solution to a problem, whether it's maximizing profit, minimizing cost, or
improving efficiency.

o Decision-Oriented: OR is ultimately aimed at providing decision-makers with

the information and insights needed to make more effective and informed
choices.

Scope of Operation Research: OR has a wide range of applications across various industries
and sectors. Some key areas include:

o Manufacturing: Production planning and scheduling, inventory control,

supply chain management, facility layout, quality control.

o Transportation and Logistics: Route optimization, vehicle scheduling, network

design, warehouse management.

o Finance and Investment: Portfolio optimization, risk management, financial

modeling, capital budgeting.

o Marketing and Sales: Market research, advertising strategy, sales forecasting,

pricing decisions.

o Healthcare: Resource allocation, hospital bed management, scheduling of

medical staff, drug development.

o Telecommunications: Network design, capacity planning, resource allocation.

o Energy: Power generation scheduling, grid optimization, renewable energy

integration.

o Public Sector: Urban planning, resource allocation for public services,

emergency response management.

o Project Management: Project scheduling, resource allocation, risk

assessment.

4. What are the advantages and Limitations LPP? Advantages of Linear Programming
(LPP):

o Optimality: LPP can find the optimal solution (maximum or minimum value of
the objective function) if one exists.

o Resource Allocation: It provides a powerful framework for efficiently

allocating scarce resources among competing activities.
 o Decision Making: LPP provides valuable insights and quantitative support for
decision-making in complex situations.

o Sensitivity Analysis: It allows for examining how changes in input parameters

affect the optimal solution, providing a better understanding of the problem's
robustness.

o Handling Multiple Constraints: LPP can effectively handle problems with

numerous constraints and variables.

o Foundation for Other Techniques: The concepts and techniques of LPP form
the basis for many other optimization methods.

Limitations of Linear Programming (LPP):

o Linearity Assumption: LPP assumes linear relationships between variables in

the objective function and constraints. Many real-world problems involve
non-linear relationships, which cannot be accurately modeled by LPP.

o Divisibility Assumption: LPP assumes that decision variables can take on

continuous (fractional) values. In some cases, variables must be integers (e.g.,
number of machines), requiring integer programming techniques.

o Certainty Assumption: LPP assumes that all parameters (coefficients in the

objective function and constraints) are known with certainty. In reality, these
parameters may be uncertain or stochastic.

o Static Nature: Basic LPP models are static, meaning they represent a single
time period. Dynamic problems that evolve over time require more complex
modeling approaches.

o Complexity for Large Problems: Solving very large-scale LPPs can be

computationally intensive and may require specialized algorithms and
software.

o Formulation Challenges: Formulating a real-world problem as an LPP can be

challenging, requiring careful identification of variables, objective function,
and constraints.

5. State the mathematical formulation of the Assignment problem? The mathematical

formulation of the Assignment Problem can be stated as follows:

Objective Function: Minimize (or Maximize) the total cost (or profit) of assignment: i=1∑n
j=1∑ncijxij where:

o n is the number of agents (or resources) and the number of tasks.

o cij is the cost (or profit) of assigning agent i to task j.

 o xij is a binary decision variable, such that:

▪ xij=1 if agent i is assigned to task j.

▪ xij=0 otherwise.

Constraints:

4. Each agent must be assigned to exactly one task: j=1∑nxij=1for each agent i=1,2,...,n

5. Each task must be performed by exactly one agent: i=1∑nxij

=1for each task j=1,2,...,n

6. Non-negativity and Integer Restriction: xij∈{0,1}for all i,j=1,2,...,n

This formulation ensures that each agent is assigned to one and only one task, and each task
is performed by one and only one agent, while minimizing the total cost (or maximizing the
total profit) of the assignments.

6. Define operations Research? Explain briefly about Nature and scope of operations
Research. This is a repetition of question 12 and the first part of question 3. Please
refer to those answers for the definition, nature, and scope of Operations Research.

7. Explain the different types of models? Operations Research utilizes various types of
models to represent real-world systems. These can be classified based on different
characteristics:

o By Structure:

▪ Iconic Models (Physical Models): These are physical replicas of the

system being studied, often scaled down or up (e.g., a model airplane,
a globe).

▪ Analogue Models: These use one set of properties to represent

another set of properties (e.g., a roadmap where distances represent
travel time, a flow chart representing a process).

▪ Symbolic (Mathematical) Models: These use mathematical symbols,

equations, and inequalities to represent the relationships within the
system (e.g., linear programming models, simulation models).

o By Time Reference:

▪ Static Models: These represent a system at a specific point in time and

do not account for changes over time (e.g., a snapshot inventory
model).

▪ Dynamic Models: These consider the changes in the system over time
(e.g., a simulation of a queuing system over several hours).
 o By Degree of Certainty:

▪ Deterministic Models: These assume that all input parameters and

outcomes are known with certainty (e.g., a basic linear programming
model with fixed coefficients).

▪ Probabilistic (Stochastic) Models: These account for uncertainty and

randomness in input parameters and outcomes, often using
probability distributions (e.g., queuing models, simulation models
with random variables).

o By Purpose:

▪ Descriptive Models: These describe the characteristics or behavior of

a system without necessarily predicting or optimizing (e.g., a model of
customer flow in a store).

▪ Predictive Models: These forecast future outcomes based on current

and historical data (e.g., a demand forecasting model).

▪ Normative (Optimization) Models: These aim to find the best course

of action to achieve a desired objective under given constraints (e.g., a
linear programming model to maximize profit).

8. Elucidate the various assumptions of LPP? Linear Programming Problems (LPPs) rely
on several key assumptions for their validity and applicability:

o Linearity: The objective function and all constraint functions must be linear.
This means that the relationship between variables is directly proportional,
and there are no terms involving powers of variables, products of variables, or
non-linear functions.

o Additivity: The total contribution of different variables in the objective

function and the total usage of each resource in the constraints must be the
sum of the individual contributions or usages. There are no synergistic or
diminishing returns effects.

o Divisibility: Decision variables can take on any non-negative real (continuous)

values. Fractional solutions are permissible and meaningful. If integer
solutions are required, integer programming techniques must be used.

o Certainty: All parameters (coefficients in the objective function