Group Work on Simulation

A health insurance product is designed targeting people with certain lifestyle. The premium charged is Rs. 5000 per policy. Considering the types of coverage in the policy, the probability that a policy will become a claim policy is estimated to be 0.2. The Insurance Company offering the cover has collected the data related to treatment expenses of various diseases covered under the scheme. Based on this, the claim amount is likely to vary linearly between Rs. 10000 to Rs. 50000. 

The company keeps 20% of the premium amount collected for meeting overhead and other expenses and only 80% is available for claim settlement.

The Insurance Company wants to do such business only if the probability of loss is less than or equal to 20%.

The probability of loss in the present case is quite high (over 90%). Recommend measures to reduce the probability of loss below 20%.

Make 4 sets of Simulation run of length 1000 for each of your recommendations and present the result in summarized form.

 

Last date for submission: 29th December 2012.

 

For practice on AHP

The work is related to decision making by ranking of alternatives. Suppose you have following alternatives to choose from at the end of the course:

 

1. 2 job offers

2. One admission offer for higher studies

3. Two opportunities to start own business

 

Identify factors that will be considered in evaluating the alternatives, assign weight to these factors, build some system to assign score to the alternatives in these factors, build a system to analyze these data and rank alternatives.

Question On LP formulation and Graphical Method

A Carpenter manufactures tables and chairs. He has all the resources in abundance except wood, a type of chemical and nails. The profitability and resource requirements for the two products are given in following table. The availability of resources per day is also given. How many tables and chairs he should manufacture daily so that his profit is maximized? Formulate the linear programme and solve that using graphical method. Assume that fraction values for number of tables and chairs are acceptable.          

 

	Table	Chair
Profit/unit->	20$	30$	Availability/day
Wood/unit in kg.	40	30	1200
Nails/unit in number	25	40	1000
Chemical in ml/unit	30	45	1600

 

 

One of the above mentioned resources is not limiting the solution. Identify that. 

 

The availability of this resource starts decreasing. What is the minimal availability for this resource that ensures it to remain a non-limiting factor?                                  

 

The availability is further reduced below this point by 100 units. Will the optimum solution change? If yes, what is/are the changed optimum solution/s?