Consider the multi-item newsvendor setting described in Section 9.3. Equation 9.12-.-

defines the optimal quantity for a given item i and a particular budget M.

a. In order for an item i to be stocked, the right-hand side of Equation 9.12 must be positive. Write an inequality with the right-hand side of Equation 9.12 greater than or equal to zero and rearrange this inequality to get a condition where the budget M is isolated on one side of the inequality.

b. How can you use this inequality to determine which items will be stocked for a given budget level M?

c. What is the economic interpretation of this inequality?? Lp852