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Lecture 9: LP in Excel (Review Assign. 1)

Lecture 9: LP in Excel (Review Assign. 1). AGEC 352 Spring 2012 – February 13 R. Keeney. The 3 Crop Problem. Excel Setup of 3 Crop Problem (Show Formulas). Note the use of absolute cell references (e.g. $B$3), which allows copying of the formulas down the LHS column.

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Lecture 9: LP in Excel (Review Assign. 1)

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  1. Lecture 9: LP in Excel (Review Assign. 1) AGEC 352 Spring 2012 – February 13 R. Keeney

  2. The 3 Crop Problem

  3. Excel Setup of 3 Crop Problem(Show Formulas) Note the use of absolute cell references (e.g. $B$3), which allows copying of the formulas down the LHS column.

  4. Question 1: Why split up the labor? • When given a question like this, you should always feel free to solve the model again as part of you answer.

  5. Question 1: Labor modeling • The model without the labor split would have us overplanting corn relative to seasonal labor availability. • That model also shows us that if we could move labor around in time or get more than 1600 hours in Jan-Apr we could earn more profits.

  6. Questions 2-4. • Planting • Corn = 275 • Wheat = 120 • Oats = 105 • Profits = 18,315 • Binding Constraints (LHS = RHS) • Total Land(500) • Wheat allotment (120) • Jan-Apr labor (1600)

  7. Q4: Binding Constraints • Why do we identify these? • 1) While all of the constraints are part of the problem, only the constraints that bind are meaningful. • They define the corner point of the solution. • 2) Having more of the resource in a binding constraint would make us better off. • Without solving the model you can say that removing wheat allotment will increase profits. Solve the model to know how much…

  8. Questions 5 and 6: More land and what is it worth? • Solve the model again assuming we have 501 acres of total land. • Corn = 274.75 • Wheat = 120 • Oats = 106.25 • Increase oats by 1.25 while reducing corn by 0.25 • Add’l land lets us use more of our labor • Same constraints bind • Profits = 18329 • 18329 – 18315 = ~14.00 is the maximum amount of rent that can be paid for land.

  9. Question 7: No wheat allotment • Constraint binds so we know profits should increase • Only reason we produce oats is the wheat allotment

  10. Question 8: Corn Only • Set Corn to its max value and compare • The value of the crop mix is that we use resources more fully…

  11. Time for Quiz

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