Slides TKT CA LPP

Mathematical Economics
PART III: Linear Programming
Hà Văn Hiếu
University of Economics and Law
23rd March 2022
Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 1 / 38

Linear Programming - Example
One of the main products of the P & T COMPANY is canned peas.
The peas are prepared at three canneries and then shipped by
truck to four distributing warehouses.
The number of truckloads, along with the shipping cost per
truckload for each cannery-warehouse combination, is given in the
following table.
The problem now is to determine which plan for assigning these

shipments to the various cannery-warehouse combinations would
minimize the total shipping cost.
Linear Programming - Example P2
Let Z denote the total shipping cost, and let
xij (i = 1, 2, 3; j = 1, 2, 3, 4) be the number of truckloads to be shipped
from cannery i to warehouse j.
This is a Linear programming problem.

Linear Programming Problem (LPP)
The Linear Programming Problems (LPP) is a problem that is

concerned with finding the optimal value (i.e. either maximum or
minimum value) of a given linear function, which is referred as an
objective function. The objective function can contain several
variables, which are subjected to linear constraints.
A standard form of the model:
Maximize Z = c1 x1 + c2 x2 + · · · + cn xn
subject to
a11 x1 + a12 x2 + · · · + a1n xn ≤ b1
a21 x1 + a22 x2 + · · · + a2n xn ≤ b2
···
am1 x1 + am2 x2 + · · · + amn xn ≤ bm
and
x1 , x2 , . . . , xn ≥ 0

LPP - History
The problem of solving a system of linear

inequalities dates back at least as far as
Fourier, who in 1827 published a method for
solving them.
In 1939 a linear programming formulation of
a problem was given by the Soviet
mathematician and economist Leonid
Kantorovich, who also proposed a method for
solving it.
About the same time as Kantorovich, the
Dutch-American economist T. C. Koopmans
formulated classical economic problems as
linear programs. Kantorovich and Koopmans
later shared the 1975 Nobel prize in
economics.
LPP - History 2
In 1947, George B. Dantzig invented the

simplex method that for the first time
efficiently tackled the LPP in most cases.
Neumann immediately conjectured the
theory of duality by realizing that the
problem he had been working in game theory
was equivalent.
In 1979, the LPP was first shown to be
solvable in polynomial time by Leonid
Khachiyan.
In 1984, Narendra Karmarkar introduced a
new interior-point method for solving
linear-programming problems.

LPP - Other forms
The Standard form: A standard form of the model:

Maximize Z = c1 x1 + c2 x2 + · · · + cn xn
subject to
a11 x1 + a12 x2 + · · · + a1n xn ≤ b1
a21 x1 + a22 x2 + · · · + a2n xn ≤ b2
···
am1 x1 + am2 x2 + · · · + amn xn ≤ bm
and
x1 , x2 , . . . , xn ≥ 0
The other forms:

Minimizing rather than miximizing.
ai1 x1 + ai2 x2 + · · · + ain xn ≥ bi
ai1 x1 + ai2 x2 + · · · + ain xn = bi
xi unrestricted in sign.

LPP - Terminology
Objective function: Z = c1 x1 + c2 x2 + · · · cn xn
Constraints, functional constraints or structural constraints,
nonnegativity constraints or nonnegativity conditions.
A solution is an n-tuple (α1 , α2 , . . . , αn ) ∈ Rn .
A feasible solution is a solution for which all the constraints are
satisfied.
A solution which is not a feasible solution is called an infeasible
solution.
The feasible region is the collection of all feasible solutions.
An optimal solution is a feasible solution that the most favorable
value of the objective function, i.e. the largest value for max
problem and the smallest value for the min problem.

LPP - Terminology - 2
It is possible for a problem to have no feasible solutions.

Most problems will have just one optimal solution. However, it is
possible to have more than one. If so, the problem will have
infinite number of optimal solutions.
Another possibility is that a problem has no optimal solutions.
This occurs only if (1) it has no feasible solutions or (2) the
constraints do not prevent improving the value of the objective
function Z indefinitely in the favorable direction (positive or
negative). The latter case is referred to as having an unbounded Z
or an unbounded objective.
A corner-point feasible (CPF) solution is a solution that lies at a
corner of the feasible region.

LPP - Terminology - Example
Empty feasible region:

Infinite optimal solutions:

No optimal solution:

Five CPF points:
Relationship between optimal

solutions and CPF solutions:
the best CPF solution must be an
optimal solution. Thus, if a
problem has exactly one optimal
solution, it must be a CPF
solution. If the problem has
multiple optimal solutions, at least
two must be CPF solutions.

Assumptions of LPP
Proportionality assumption: The contribution of each activity to

the value of the objective function is proportional to the level of the
activity xj , as represented by the cj xj term in the objective
function. Similarly, the contribution of each activity to the
left-hand side of each functional constraint is proportional to the
level of the activity xj , as represented by the aij xj term in the
constraint. In the other words, the marginal values of the objective
function w.r.t. the activities are all constant.

Assumptions of LPP - 2
Additivity assumption: Every function in a linear programming

model (whether the objective function or the function on the
left-hand side of a functional constraint) is the sum of the
individual contributions of the respective activities.

Assumptions of LPP - 3
Divisibility assumption: Decision variables in a linear programming

model are allowed to have any values, including noninteger values,
that satisfy the functional and nonnegativity constraints. Thus,
these variables are not restricted to just integer values. Since each
decision variable represents the level of some activity, it is being
assumed that the activities can be run at fractional levels.
Mathematical models with the restriction that some of or all the
decision variables must be integer values are called integer
programming models.
Certainty assumption: The value assigned to each parameter of a
linear programming model is assumed to be a known constant.
For this reason it is usually important to conduct sensitivity
analysis after a solution is found that is optimal under the
assumed parameter values.

Graphical method
Minimize Z = 3x1 + 5x2

subject to
x1 ≤ 4
2x2 ≤ 12
3x1 + 2x2 ≤ 18
x1 , x2 ≥ 0

Graphical method - 2

Graphical method - 3

The simplex method
The simplex method is an algebraic procedure. However, its

underlying concepts are geometric.
Optimal test: Consider

any linear programming
problem that possesses at
least one optimal solution. If
a CPF solution has no
adjacent CPF solutions that
are better (as measured by
Z), then it must be an
optimal solution.

The Essence of the Simplex method - 1
1 Solution concept 1: The simplex method focuses solely on CPF

solutions. For any problem with at least one optimal solution,
finding one requires only finding a best CPF solution
2 Solution concept 2: The simplex method is an iterative
algorithm (a systematic solution procedure that keeps repeating a
fixed series of steps, called an iteration, until a desired result has
been obtained) with the following structure.

Solution concept 3: Whenever possible, the initialization of the

simplex method chooses the origin to be the initial CPF solution.
Solution concept 4: Given a CPF solution, the simplex method
always chooses a CPF solution that is adjacent to the current one.
No other CPF solutions are considered.

Solution concept 5: After the current CPF solution is identified,

the simplex method identifies the rate of improvement in Z that
would be obtained by moving along the edge. Among the edges
with a positive rate of improvement in Z, it then chooses to move
along the one with the largest rate of improvement in Z.
Solution concept 6: The optimality test consists simply of
checking whether any of the edges give a positive rate of
improvement in Z. If none do, then the current CPF solution is
optimal.

Practice
Apply the simplex method for the following problem:

Augmented forms - 1
By adding slack variables, we may bring any form of an LPP to its

augmented form:

Augmented forms - 2
An augmented solution is a solution for the original variables (the

decision variables) that has been augmented by the corresponding
values of the slack variables.
A basic solution is an augmented corner-point solution.
A basic feasible (BF) solution is an augmented CPF solution.

Augmented solutions - example - p100
(3, 2) is a solution of the

original form and (3, 2, 1, 8, 5)
is the corresponding
augmented solution.
(4, 6) is a corner-point
infeasible solution and
(4, 6, 0, 0, −6) is its
corresponding basis solution.
(0, 6) is a CPF solution and
(0, 6, 4, 0, 6) is its
corresponding BF solution.
Exercise: Determine all the basis solutions and BF solutions.

Basis Solutions
The number of variables − the number of equations = 2 =
the number of variables which have zero-values in the BF solution.
Thus, in order to determine a BF solution, two of the variables (called
the nonbasic variables) will be set equal to zero, and the other three
variables (called the basic variables) will be determined by solving the
system of three equations.

Properties of Basis Solutions
A basic solution has the following properties:

1 Each variable is designated as either a nonbasic variable or a basic
variable.
2 The number of basic variables equals the number of functional
constraints (now equations). Therefore, the number of nonbasic
variables equals the total number of variables minus the number of
functional constraints.
3 The nonbasic variables are set equal to zero.
4 The values of the basic variables are obtained as the simultaneous
solution of the system of equations (functional constraints in
augmented form). (The set of basic variables is often referred to as
the basis.)
5 If the basic variables satisfy the nonnegativity constraints, the
basic solution is a BF solution.

Properties of BF solutions
1 Two BF solutions are adjacent if all but one of their nonbasic
variables are the same. This implies that all but one of their basic
variables also are the same, although perhaps with different
numerical values.

The Geometric and Algebraic interpretation of Simplex
method

Optimal test
The initial CPF solution (0, 0) yields the initial BF solution

(0, 0, 4, 12, 18). Basic variables: x3 , x4 , x5 and nonbasic variables:
x1 , x2 .
The objective function is Z = 3x1 + 5x2 takes the value 0 at the
initial BF solution. The coefficient of each nonbasic variable x1 , x2
gives the rate of improvement in Z. These rates of improvement (3
and 5) are positive. Therefore, we conclude that (0, 0, 4, 12, 18) is
not optimal.
For each BF solution examined after subsequent iterations, at least
one basic variable has a nonzero coefficient in the objective
function → new equation on objective function (based on just new
nonbasic variables) → new coefficients (or rate of improvements).
We will stop when the latest coefficients are not positive.

Determining the Direction of Movement and Where to
stop (Step 1 and 2)
Z = 3x1 + 5x2
Increase in x1 Rate of improvement in Z is 3
Increase in x2 Rate of improvement in Z is 5 Choose x2 to increase.
x2 is called the entering basis variable for iteration 1.
x2 is converted to a basis variable (while keeping the nonbasic variable
x1 = 0)
x1 =0
x1 + x3 = 4 ⇔ x3 =4
2x2 + x4 = 12 ⇔ x4 = 12 − 2x2
3x1 + 2x2 + x5 = 18 ⇔ x5 = 18 − 2x2
Thus, x2 can be increased just to 6. These calculations are referred to as

the minimum ratio test. The basic variable in the equation with the
minimum ratio is the one that drops to zero first as the entering basic
variable is increased.
In summary, x4 is the leaving basis variable for iteration 1.
Solving for the New BF Solution (Step 3 of Iteration 1)
Increasing x2 = 0 to x2 = 6 moves us from the initial BF solution

on the left to the new BF solution on the right of the following
table.
Initial BF solution New BF solution
Nonbasic variables x1 = x2 = 0 x1 = x4 = 0
Basic variables x3 = 4, x4 = 12, x5 = 18 x3 =?, x2 = 6, x5 =?
Let Z = 3x1 + 5x2 then


Z − 3x1 − 5x2 =0


 x 1 +x 3 =4


 2x2 + x4 = 12

 3x1 + 2x2 + x5 = 18

Solving for the New BF Solution - Iteration 1
Initial BF solution: (0, 0, 4, 12, 18). Objective function
Z = 3x1 + 5x2 . Nonbasic variables: x1 , x2 .

Z
 − 3x1 − 5x2 =0


 x1 + x3 =4


 2x2 + x4 = 12

 3x 1+ 2x 2 + x = 18
5
 5
Z − 3x1 − x4 = 30
2



x1 + x3 =4

⇔ 1

 x2 + x4 =6

 2
− x4

3x1 + x5 = 6
New BF solution: (0, 6, 4, 0, 6). Objective function

5
Z = 30 + 3x1 − x4 . Nonbasic variables: x1 , x4
2
New basis variable - Iteration 2
5
Z = 30 + 3x1 − x4
2
Increase in x1 Rate of improvement is 3
Increase in x4 Rate of improvement is −4 < 0 Choose x1 to increase
x1 is now entering basis variable (while x4 = 0):
x4 = 0
x1 + x3 = 4 ⇔ x3 = 4 − x1
2x2 + x4 = 12 ⇔ x2 = 6
3x1 + 2x2 + x5 = 18 ⇔ x5 = 6 − 3x1
minimum ratio test is equal to 2. x5 is the leaving basis variable for

iteration 2.

Solving for the New BF Solution (iteration 2)
Previous BF solution: (0, 6, 4, 0, 6). Objective function
5
Z = 30 + 3x1 − x4 . Nonbasic variables: x1 , x4 .
2
5

Z
 − 3x1 − x4 = 30

 2
x1 + x3 =4

1

 x2 + x4 =6

 2
3x1 − x4 + x5 = 6

3


 Z + x4 + x5 = 36

 2

 1 1
x3 + x4 − x5 = 2


⇔ 3 3
1

 x 2 + x 4 =6
2


1 1


x1 − x4 + x5 = 2


3 3
3
New BF solution: (2, 6, 2, 0, 0). Objective function Z = 36 − x4 − x5 .
2
Nonbasic variables: x4 , x5 .
The Simplex method in Tabular form
Algebraic form of the problem
Choose the column which is corresponding to the largest absolute

value on coefficients of objective function.

The Simplex method in Tabular form - 2



More exercises: p152 - F. S. Hillier - Introduction to OR

Projects
Game theory and Linear programming problem (project).

Leontief Input-Output model as a LPP (project).
Regional Planning (p47) (teamwork).
Controlling Air Pollution (p51) (teamwork).
Reclaiming Solid Wastes (p53) (teamwork)
Personnel Scheduling (p57) (teamwork).
Distributing Goods through a Distribution Network (p60)
(teamwork).
Solver-Excel (p65) (teamwork).

Any question?
Thank you!

Slides TKT CA LPP

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Slides TKT CA LPP

Uploaded by

Copyright:

Available Formats

Mathematical Economics

PART III: Linear Programming

University of Economics and Law

23rd March 2022

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 1 / 38

The problem now is to determine which plan for assigning these

This is a Linear programming problem.

The Linear Programming Problems (LPP) is a problem that is

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 4 / 38

The problem of solving a system of linear

In 1947, George B. Dantzig invented the

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 6 / 38

The Standard form: A standard form of the model:

The other forms:

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 7 / 38

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 8 / 38

It is possible for a problem to have no feasible solutions.

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 9 / 38

Empty feasible region:

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 10 / 38

Infinite optimal solutions:

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 10 / 38

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 10 / 38

Five CPF points:

Relationship between optimal

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 10 / 38

Proportionality assumption: The contribution of each activity to

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 11 / 38

Additivity assumption: Every function in a linear programming

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 12 / 38

Divisibility assumption: Decision variables in a linear programming

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 13 / 38

Minimize Z = 3x1 + 5x2

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 14 / 38

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 15 / 38

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 16 / 38

The simplex method is an algebraic procedure. However, its

Optimal test: Consider

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 17 / 38

1 Solution concept 1: The simplex method focuses solely on CPF

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 18 / 38

Solution concept 3: Whenever possible, the initialization of the

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 19 / 38

Solution concept 5: After the current CPF solution is identified,

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 20 / 38

Apply the simplex method for the following problem:

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 21 / 38

By adding slack variables, we may bring any form of an LPP to its

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 22 / 38

An augmented solution is a solution for the original variables (the

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 23 / 38

(3, 2) is a solution of the

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 24 / 38

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 25 / 38

A basic solution has the following properties:

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 26 / 38

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 27 / 38

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 28 / 38

The initial CPF solution (0, 0) yields the initial BF solution

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 29 / 38

Thus, x2 can be increased just to 6. These calculations are referred to as

Increasing x2 = 0 to x2 = 6 moves us from the initial BF solution

Hà Văn Hiếu (UEL) Mathematical Economics 23rd March 2022 31 / 38