Linear Programming (Chapter 7)
developing a mathematical model to represent
 Linear programming is a widely used
mathematical modeling technique designed to
help managers in planning and decision making
relative to resource allocation.
 Mathematical programming has little to do with
computer programming
 Programming refers to modeling and solving a
problem mathematically
 All LP problems have several properties and
assumptions in common.
 Objective function is the property of
maximizing or minimizing some quantity, such
as profit or cost
 Objectives must be stated clearly and defined
mathematically.
 It does not matter whether profits and costs are
measured in cents, dollars, or millions of dollars
 Constraints the restrictions that limit the degree
to which we can pursue our objective
 Objectives and constraints in LP problems must
be expressed in terms of linear equations or
inequalities.
 Linear mathematical relationships mean that all
terms used in the objective function and
constraints are of the first degree
 The term linear implies both proportionality and
additivity (all activities equals the sum of the
individual activities)
 We assume that conditions of certainty exist:
that is, numbers in the objective and constraints
are known with certainty and do not change
during the period being studied
 We also assume divisibility where solutions
need not be in whole numbers (integers),
instead they are divisible and may take any
fractional value (work in process)
 We assume that all answers or variables are
nonnegative since negative values of physical
quantities are impossible, as you cannot
produce negative number of items.
To summarize the properties of linear programs
1. One objective function
2. One or more constraints
3. Alternative courses of action
4. Objective function and constraints are linear—
proportionality and divisibility
5. Certainty
6. Divisibility
7. Nonnegative variables
 Formulating a linear program involves
the managerial problem
 Steps in formulating a linear program:
o Understand the managerial problem
being faced
o Identify the objective and constraints
o Define the decision variables
o Use the decision variables to write
mathematical expressions for the
objective function and the constraints
 Product mix problems use LP to decide how
much of each product to make, given a series of
resource restrictions
 Technically, in LP, we maximize total
contribution margin which is the difference
between unit selling price and variable costs
excluding depreciation, fixed general expense,
and advertising.
Graphical solution method
 The easiest way to solve a small LP problem is
with the graphical solution approach
 The graphical procedure is useful only when
there are two decision variables. When there are
more than two variables, it is not possible to plot
the solution on a 2D graph
 However, the graphical method is invaluable in
providing us with insights into how other
approaches work
 We are always working in the first quadrant of
the graph
 The shaded region represents the area of
solutions that does not exceed either of the set
constraints; feasible region
 The feasible region must satisfy all conditions
specified in the problem’s constraints
 An infeasible solution represents any point
outside the shaded area
Isoprofit Line Solution Method
 The optimal solution is the point lying in the
feasible region that produces the highest profit
 The speediest one to apply in solving for the
optimal solution is this method
 Started by letting profit equal an arbitrary but
small dollar amount and to find the intercepts of
such solution
 Isoprofit involves graphing parallel profit lines
 Slope can be obtained by arranging the
objective function from b=mx+y to y=mx+b
  Gradually increase the profit (DECREASE THE
COST) and find x1 and x2 by using the same
constants so that the lines are parallel to each
other
 The farther we move from the origin, the higher
the profit will be
Corner Point Solution Method
 This technique is simpler conceptually that the
isoprofit line approach, but it involves looking at
the profit at every corner point of the feasible
region
 The mathematical theory behind LP states that
an optimal solution to any problem will lie at a
corner point, or extreme point, of the feasible
region
 Elimination method is used to solve equations
simultaneously
Slack and surplus
 Slack is the amount of a resource that is not
used in a less-than-or-equal-to constraint
 Slack = right hand side – left hand side
 Surplus is used with greater-than-or-equal-to
constraints to indicate the amount by which the
right hand side of a constraint is exceeded
 Surplus = actual amount – required
 A constraint that has zero slack or surplus for
the optimal solution is called a binding
constraint
 A constraint with positive slack or surplus for the
optimal solution is called a nonbinding
constraint
Solving minimization problems
 Commonly for minimizing an objective such as
cost
 For minimization problems, it is easier to
simultaneously solve for the equations by
method of elimination between lines that
intersect
 Minimization problems are often unbounded
outward
 Since the constraints are now greater-than-or-
equal-to, the feasible solution area will be above
the constraint lines in this example
 The optimal solution is usually the extreme in the
lower left
 The lowest isocost line (the one closes to the
origin) provides us with the optimal solution
corner
Four special cases in LP
1) No feasible solution—when there is no solution
to an LP problem that satisfies all of the
constraints given
2) Unboundedness—when the profit in a
maximization problem can be infinitely large and
is missing one or more constraints, then the
problem is unbounded
3) Redundancy—a constraint that does not affect
the feasible solution region
4) Alternate optimal solutions—there are multiple
optimal solutions wherein the objective function’s
iso-objective line runs perfectly parallel to one of
the problem’s constraints
Sensitivity analysis
 Optimal solutions have been found under
deterministic assumptions where we assume
complete certainty in the data and relationships
of a problem
 When an optimal solution is found, we recognize
the importance of seeing just how sensitive that
solution is to model assumptions and data
 Changes in the following areas are tested to see
its effect on the feasible solution found
o Contribution rates for each variable
o Technological coefficients (the numbers
in the constraint equations)
o Available resources
 Sensitivity analysis is the examination of
changes after the optimal solution has been
reached
 Two approaches to determining just how
sensitive an optimal solution is to changes:
o Trial and error
o Analytic postoptimality method
 If a constraint is binding, obtaining additional
units of that resource will usually result in higher
profits.
 For a nonbinding constraint, obtaining additional
units of that resource will not result in higher
profits and will only increase slack
Changes in the objective function coefficient
 Change in coefficient usual mean no change
in the feasible region but the slope of the iso-
objective line will change
 An extreme change in coefficient may also
cause a new corner point to become optimal due
 We can increase or decrease the objective
function coefficient of any variable and the
 current corner point may remain optimal if the
change is not too large
 However, if we increase or decrease the
coefficient by too much, the optimal solution
could change to a different corner point
 The current solution remains optimal unless an
objective function coefficient is increased to a
value above the upper bound, or decreased to a
value below the lower bound
 If the change equals to the upper or lower
bound, there would be two optimal solutions as
the objective function would be parallel to the
first constraint
 The upper and lower bounds relate to changing
only one coefficient at a time
Changes in the technological coefficients’
 Changes in the technological coefficients
(coefficient constraints) affect the shape of
the feasible solution region, and therefore,
the optimal solution.
 These changes will have no effect on the
objective function of an LP problem, but they can
produce a significant change in the shape of the
feasible solution region, and hence in the
optimal profit or cost
Changes in the resources or right-hand side values
 If the RHS of a constraint is changed, the
feasible region will change and often the
optimal solution will change.
 If the constraint is nonbinding, increase in RHS
will increase profit
The Simplex Method (Module 7)
 Most real life problems have more than two
variables and are thus too large for the simple
graphical solution procedure
 The simplex method examines the corner points
in an iterative manner, that is, repeating the
same set of procedures time after time until an
optimal solution is reached
 Each iteration brings a higher value for the
objective function so that we are always moving
closer to the optimal solution
 The simplex approach yields not only the optimal
solution to the decision variables and maximum
profit (minimum cost), but also valuable
economic information.
 Looking at a graphical solution first will help us
understand the steps in the simplex method
 The dual price for a constraint is the
improvement in the objective function value that
results from a one unit increase in the right hand
side value of the constraint.
 The upper and lower bounds of a constraint are
the amounts at which the dual price will be
nulled (the profit will stop increasing) when the
RHS of the constraint exceed such bounds
 Dual prices will change if the amount of the RHS
of the constraint goes above the upper bound or
below the lower bound
 If the constraint has slack, increase in RHS
would not increase profit but simply increase the
amount of slack.
 A dual price of 0 will remain relevant as long as
the RHS does not go below the lower bound or
above upper bound.
 A shadow price is the change in the objective
function value that results from a one-unit
increase in the RHS of a constraint (simply, dual
price)
 Maximization
o Improvement in objective function value
is the same as a positive change
o Dual and shadow price are exactly the
same
 Minimization
o Improvement in the objective function is
the same as a negative change (a
decrease in cost)
o The shadow price will be the negative of
the dual price
How to Set Up the Initial Simplex Solution
 The theory of LP states the optimal solution will
lie at a corner point of the feasible region. In
large LP problems, the feasible region cannot be
graphed because it has many dimensions, but
the concept is the same.
 The simplex method systematically examines
corner points, using algebraic steps, until an
optimal solution is found
 The first step of the simplex method requires
that we convert each inequality constraint
(except non-negativity constraints) in an LP
formulation into an equation
 ≤ Add slack variable (+s1)
 The slack variable represent unused resources
in the department which concerns the certain
constraint
  If nothing is produced, we have a slack of those
resources equal to the RHS of the constraint
 Slack variables yield no profit
 ≥ Minus surplus variable (-s2) and add artificial
variable (+A1)
 = Add artificial variable (+A1)
Finding an Initial Solution Algebraically
 Set the real variables in the constraints to 0 to
find the value of the slack/surplus variables
 A basic feasible solution to a system is
established wherein n equations is found by
setting all but n variables equal to 0 and solving
for the other variables
 This first solution produces a profit of 0 as well
as slack variables equal to the constant (RHS)
terms in the constraint equations
 The simplex method considers only feasible
solutions and hence will touch no possible
combinations other than the corner points of the
shaded region.
 The initial solution begins where the x1 and x2 are
0, or the (0,0) corner point
 Basic variables are the variables in the solution
mix while those not in the solution mix are called
the nonbasic variables
 For any corner point, exactly two of the four
variables will equal zero
 Substitution rates are numbers in the body of
the table
 For every unit of a variable introduced into the
current solution n1 units of s1 and n2 units of s2
must be removed from the solution. n=constraint
coefficient for a specific variable
 Or any variable ever to appear in the solution
mix column, it must have the number 1
someplace in its column and 0s in every other
place in that column.
 The Z-row entry in the quantity column provides
the gross profit
 The Cj – zj gives the net profit from introducing
one unit of each variable into the solution
 To identify which corner point the tableau is, look
at the basic variables. The quantity of the real
variable in the solution mix is the point for that
variable and if the variable is non-basic, the
point is 0.
 The net profit row indicates (1) whether the
current solution is optimal and if it is not, (2)
which variable should enter and leave the next
solution mix.
Surplus and Artificial Variables
 We subtract a surplus variable and add an
artificial variable to form an equality when
dealing with a ≥ constraint
 Artificial variables have no physical meaning and
drop out of the solution mix before the final
tableau
 If an artificial variable has a positive (nonzero)
value, then the original constraint where this
artificial variable was added has not been
satisfied.
 Before the final simplex solution has been
reached, all artificial variables must be gone
from the solution mix
 Since artificial variables must be forced out of
the solution, we can assign a very high Cj cost to
each
Maximization
 Pivot column (entering variable)—the most
positive net profit
 Pivot row (leaving variable)—the row with the
smallest nonnegative calculated ratio
(quantity:pivot column equivalent) disregard 0
and negative ratios
 When there are no more positive numbers in the
net profit row (only negative and zero), an
optimum solution has been reached
 -M
Minimization
 Pivot column (entering variable)—the most
negative cost (Cj – zj)
 Pivot row (leaving variable)—the row with the
smallest nonnegative calculated ratio
(quantity:pivot column equivalent) disregard 0
and negative ratios
 When there are no more negative numbers in
the cost row (only positive and zero), an
optimum solution has been reached
 +M
More than one optimal solution
 Alternate optimal solutions may exist if the Cj – zj
is equal to 0 for a variable not in the solution mix