CHAPTER TWO

Linear Programming Models

1
 Introduction to Linear Programming
A Linear Programming model seeks to maximize or
minimize a linear function, subject to a set of linear
constraints.
LPM is a problem solving approach to decision
making.
A LPM a technique used for economic allocation of
scarce resource for several competing activity that
optimize the benefit of the organization.
Formulation of LPM mean converting the description
& numerical data into mathematical expression which
represent the relevant relationship among decision
2 factor, objective & restriction.
 Cot’d
The term linear implies a change in one variable will
always cause a resulting change in another variable, while
 the term programming refers to the method of
determining a particular program or plan of action or
Modelling & solving.
linear programming refers to a family of mathematical
techniques for determining the optimum allocation of
resources and obtaining a particular objective when
there are alternative uses of the limited or constrained
resources.
Linear programming models are mathematical
representations of LP problems.
3
 Application/Importance of Linear Programming

Many real world problems can be approximated by

linear models.

Manufacturing- develop production/inventory

Marketing- to allocate Adv. budget for d/t media

Finance (investment)- to select investment portfolio.

Agriculture-

4
These characteristics can be grouped as components and
assumptions. The components relate to the structure of a model,
where as the assumptions reveal the conditions under which the
model is valid.
COMPONENTS OF LP MODELS
There are four major components of LP models including:
Objective function, decision variables, constraints and parameters.
Objective and Objective Function
The objective in problem solving is the criterion by which all
decisions are evaluated. It provides the focus for problem solving.
 Decision variables (set of activities)
They represent unknown quantities to be solved for.
 Constraints
However, the ability of a decision maker to select values of the
decision variables in an LP problem is subject to certain restrictions
5
or limits coming from a variety of sources.
Only solutions that satisfy all constraints in a model are
acceptable and are referred to as feasible solutions.
Generally speaking, a constraint has four elements:
A right hand side (RHS)- quantity that specifies the
limit for that constraint. It must be a constant, not a
variable.
An algebraic sign that indicates whether the limit is an
upper bound that cannot be exceeded, a lower bound that
is the lowest acceptable amount, or an equality that must
be met exactly.
The decision variables to which the constraint applies.
The impact that one unit of each decision variable will
have on the right-hand side quantity of the constraint.
6
Constraints can be arranged into three groups:

System constraints – involve more than one decision variable,

Individual constraints – involve only one variable, and

Non-negativity constraints – specify that no variable will be

allowed to take on a negative value.

Parameters

The parameters are fixed values that specify the impact that

one unit of each decision variable will have on the objective

and on any constraint (e.g., X1, X2, etc.)
7
 Assumptions of the linear programming model
Linearity (proportionality)
Certainty -The parameter values are known with
certainty & constant .
The additivity assumption-There are no
interactions between the decision variables.
P=Ax+Bx
The Continuity assumption: Variables can take
on any value within a given feasible range.
Non-negativity-It assumes that negative values of
variables are unrealistic and, therefore, will not be
8
considered in any potential solutions.
 Steps in formulating LP models:
Identify the decision variables.

Determine the objective function.

Identify the constraints.

Determine appropriate values for parameters and

determine whether an upper limit, lower limit or equality is

called for.
Use this information to build a model.

Solve the problem & Validate the model.

9
 Important Definitions
Solution The set of values of decision variables
Feasible solution The set of values of decision variables, which
satisfy all the constraints & non- negativity conditions of an LPP.
Infeasible solution The set of values of decision variables which
do not satisfy all the constraints and non- negativity conditions of
an LPP.
Basic feasible solution basic variables assume non-negative
values. Basic feasible solutions are of two types:
Degenerate A basic feasible solution is called degenerate if
value of at least one basic variable is zero.
Non-degenerate A basic feasible solution is called non-
degenerate if value of all m basic variables are non- zero and
positive.
10 Optimal Basic feasible solution: A solution which optimizes

 EXAMPLE 1
A firm, that assembles computers and computer equipment,
is about to start production of two new micro computers.
Each type of microcomputer will require assembly time,
inspection time and storage space.
 The amount of each of these resources that can be devoted
to the production of the micro computers is limited.
 The manager of the firm would like to determine the
quantity of each of the microcomputers to produce in
order to maximize the profit generated by sales of these
microcomputers.
 The following additional information is provided.

1
1
 Type 1 Type 2
Profit per unit 60 50
Assembly time/unit 4hrs 10hrs
Inspection time/unit 2hrs 1hrs
Storage space/ unit 3 cubic feet 3 cubic feet
Resources available
Assembly time 100hrs
Inspection time 22 hrs
Storage space 39 cubic feet

1
2
 Required
Formulate the problem as LPM

Solve using graphic & simplex method

Construct the range of optimality and feasibility for the

objective function coefficient and right hand side values.

Interpret the shadow prices.

1
3
 Cont’d
 Decisions variables:

◦ X1 = Weekly production level of type I computer (in

dozens)
◦ X2 = Weekly production level of type II computer (in
dozens).
 Objective Function:

◦ Weekly profit, to be maximized

1
4
 Cont’d
Max 60X1 + 50X2 (Weekly profit)
subject to
4X1 + 10X2  100 (Assembly time)
2X1 + X2  22 (Inspection Time)
3X1 + 3X2  39 (storage space)
Xj> = 0, j = 1,2 (Nonnegativity)

1
5
 GRAPHICAL LINEAR PROGRAMMING
METHODS
Graphical linear programming is a relatively straightforward for

determining the optimal solution to certain linear programming

problems involving only two decision variables.
Although graphic method is limited as a solution approach, it is

very useful in the presentation of LP, in that it gives a “picture”

of how a solution is derived thus a better understanding of the
solution. More over, graphical methods provide a visual
portrayal of many important concepts.
16
 Cont’d
In this method, the two decision variables are considered

as ordered pairs (X1, X2), which represent a point in a

plane, i.e, X1 is represented on X-axis and X2 on Y-axis.

 Graphical method has the following advantages:

It is simple

It is easy to understand, and

It saves time.

17
Cont’d
Example
In order to demonstrate the method, let us take a
microcomputer problem in which a firm is about to
start production of two new microcomputers, X 1
and X2. Each requires limited resources of
assembly time, inspection time, and storage space.
The manager wants to determine how much of
each computer to produce in order to maximize the
profit generated by selling them. Other relevant
information is given below:
18
 Cont’t
Type 1 Type 2

Profit per unit $60 $50

Assembly time per unit 4 hrs 10 hrs
Inspection time per unit 2 hrs 1 hrs
Storage space per unit 3 cubic feet 3 cubic feet

19
 Availability of company resources:
Resources Amount available
Assembly time 100 hrs
Inspection time 22 hrs
Storage space 39 cubic feet
 
The model is then:
Maximize 60X1 + 50X2
Subject to Assembly 4 X 1 +10 X 2 < 100 hrs
Inspection 2 X 1 + 1 X 2 < 22 hrs
Storage 3 X 1 + 3 X 2 < 39 cubic feet
X1, X 2 > 0
20
 Step 1:Plot graphically

21
 Step 2. Identify the feasible region

Step 3. Locate the optimal solution.

22
Once the constraints are plotted and feasible region is determined, we
use either of the two graphic methods to find a solution for LP model:
i) The extreme point enumeration method
ii) The objective (Iso-profit or cost) function line approach
The Objective Function Approach
This approach involves plotting an objective function line on the graph
and then using that line to determine where in the feasible solution
space the optimal point is.
Then we determine which two constraints intersect there (in our case
inspection and storage constraints) and solve the equations
simultaneously to obtain the mix of the two decision variables that
gives the value of the objective function at the optimum.
Simultaneously solving inspection and storage equations, we find the
quantity of type 1 microcomputer to be produced (X 1) = 9 and that of
type 2 (X2) = 4 giving the maximum profit of 60(9) + 50(4) = Birr740

23
24
The Extreme Point Approach
Corner or extreme point graphic method states that for
problems that have optimal solutions, a solution will occur at
the corner point in the case of unique solution.
We then substitute the values at each corner point into the
objective function to obtain its value at each corner point and
select the one with the highest value of the objective function
(for a maximum problem) or lowest value (for a minimum
problem) as the optimal solution.

25
The extreme pints are A (0,10), B (4,9), C (9,4) & D
(11,0)
Using this method for our example, simultaneously
solving for corner points a, b, c, and d, we find
corresponding profit values of 500, 700, 740, and 660,
respectively giving us the same solution as the above one
at C. Therefore, the optimal solution is x1= 9 units and x2
= 4 units while the optimal value of objective function is
740.
Interpretation:
For a firm to maximize its profit (740), it should produce
9 units of the Model I microcomputer and 4 units of
26
model II.
Product Mix Example:
ABC private limited company is engaged in the production of
power and traction transformers. Both of these categories of
transformers pass through three basic processes: core
preparation, core to coil assembly, and vapor phase drying. A
power transformer yields a contribution of Birr 50,000 and
traction transformer contributes Birr 10,000. The time
required in the production of these two products in terms of
hours for each of the processes is as follows.
Power transformer Traction Transformer
Core preparation 75 15
Core to Coil Assembly 160 30
Vapor Phase Drying 45 10

If the capacities available are 1000, 1500, and 750 machine
hours in each processes respectively, formulate the problem as
27 LP solve using graphic Approch?
 LPP Formulation Example 2
Addis Wood work furniture Company produces tables and

chairs. Each table takes four hours of labor from the carpentry

department and two hours of labor from the finishing

department. Each chair requires three hours of carpentry and

one hour of finishing. During the current week, 240 hours of

carpentry time are available and 100 hours of finishing time.

Each table produced gives a profit of $70 and each chair a

profit of $50. Formulate LPP and How many chairs and tables
28
should be made?
1.3. Graphical Solution to LP Problems (1)
Graphical Solution to LP Problems (2)
• An equation of the form 4x1 + 5x2 = 1500 defines a straight line in
the x1-x2 plane. An inequality defines an area bounded by a
straight line. Therefore, the region below and including the line
4x1 + 5x2 = 1500 in the Figure represents the region defined by
4x1 + 5x2  1500.
• Same thing applies to other equations as well.
• The shaded area of the figure comprises the area common to all
the regions defined by the constraints and contains all pairs of xI
and x2 that are feasible solutions to the problem.
• This area is known as the feasible region or feasible solution
space. The optimal solution must lie within this region.
• There are various pairs of x1 and x2 that satisfy the constraints
such as:
The corner points are;
A (X1, X2)=(0,0) = 0
B(X1, X2)= (0,210) = 2310
C(X1,X2)= (270, 75) = 4335
D(X1, X2)= (315,0)= 4095

The Optimal solution is;

(X1=270, X2= 75) and total profit is 4335 birr

31
 Graphical Solution to LP Problems (3)
Trying different solutions, the optimal solution will be:
X1 = 270
X2 = 75
This indicates that maximum income of $4335 is obtained by
producing 270 units of product I and 75 units of product II.
•In this solution, all the raw material and available time are used,
because the optimal point lies on the two constraint lines for these
resources.
•However, 1500- [4(270) + 5(75)], or 45 ft2 of storage space, is not
used. Thus the storage space is not a constraint on the optimal solution;
that is, more products could be produced before the company ran out of
storage space. Thus this constraint is said to be slack.
Minimization problem
 Solve the following Example
Min Z=3x1 + 2x2
Subject to
5x1 +X2≥10
X1 + X2 ≥ 6
X1 +4x2 ≥ 12
X1, x2 ≥ 0
Intercepts (0,10) (2,0)
(0,6), (6,0)
(0,3), (12,0)

33
 Cont’d
Solution, Extreme points are:

A (12,0) =36
B (4,2) =16
C (1,5) =13 the optimal point that minimize cost
D (0,10) =20

34
 Cont’d
Example: Based on analysis of the current inventory level
and potential demand for the coming month, A & G
management has specified that the total production for
product 1 & 2 combined must be 350 gallon. Separately, a
major customer order for 125 gallon of product 1 must also
be satisfied. Product one requires 2 hour of processing time
per gallon while product 2 require 1 hour processing time per
gallon and for the coming month 600 hr of processing time is
available. A&G’s objective is to satisfy the above
requirement at a minimum total production cost. Production
costs are $2 per gallon for product 1 & $ 3 per gallon for
product 2. solve the problem using the graphic approach of
the linear programing problem
35
 Solution
X1= number of gallon of product 1 produced
X2=number of gallon of product 2 produced

Objective function
Min Z=2x1 + 3x2
Constraints
X1≥125- product type 1 demand
X1 + X2 ≥ 350- combined production must satisfy
2X1 +X2 ≤600- processing time
X1, X2 ≥

36
 Mixed constraints
Min Z=20x1 + 10x2
Subject to
X1 + 2x2≤40
3x1 +x2 ≥30
4x1 +3x2 ≥60
X1,x2 ≥ 0
Intercepts : (0,20) (40,0)
 (0,30) (10,0)
 (0,20) (15,0)

37
 Exercise
Solve the following maximization problem using graphic
approach
300x1+ 400x2
Subject to
5x1 +x2 ≤200
3x1 +5x2 ≤ 150
5x1 +4x2 ≥ 100
8x1 +4x2 ≥80
X1,x2 ≥0

38
 Cont’d
Solution, Extreme points
A (15,0) =300
B (40,0) =800
C (4,18)=260
D (6,12) =240
Hence it is minimization the optimal point is D
(6,12)=240 cost

39
 The Simplex Algorithm/Algebraic Solution
Method

problem faced in business & government may not be

limited to two enable to use graphic approach, rather the

problems can be dozens, hundreds, & even tough more.
We need powerful method than graphic.

Simplex method is an approach to find the feasible

solution for a LPP with more than two variables.

40
The Simplex Algorithm/Algebraic Solution
Method
The simplex method is an iterative technique that begins
with initial feasible solution.
Through algebraic manipulation, the solution is
improved until no further improvement is possible
Each iteration moves one step closer to the optimal
solution.
In each iteration, one variable that is not in the solution
is added to the solution and one variable that is in the
solution is removed from the solution in order to keep
the number of variables in the basis equal to the
number of constraints.
41
 Cont’d
The simplex procedure for a maximization problem with all
 constraints consists of the following steps
Step 1. Formulate the LPM
Step 2. Write the LPM in a standard form
 Convert all the constraints & objective function in to equalities by
adding slack variables, of the constraints are written as inequalities
 We convert the LPM in to a standard form by applying the slack
variables, S, which carries a subscript that denotes which constraint
it applies to.
 For example, S1 refers to the amount of slack in the first constraint,
S2 to the amount of slack in the second constraint, and so on.
 Slack variables can be in the form of labor hr, money & machine.
42
 Step1 cont’d
Taking the microcomputer problem its standard form is as
follows:
Zmax = 60X1 + 50X2 Zmax = 60X1 + 50X2 + 0S1 + S2 + 0S3
: 4X1 + 10X2  100 : 4X1 + 10X2 + S1 = 100
2X1 + X2  22 2X1 + X2 + S2 = 22
3X1 + 3X2  39 3X1 + 3X2 + S3 = 39
X1, X2  0 X1, X2, S1, S2, S3  0

43
 Step 3. Develop the initial tableau:
The initial tableau always represents the “Do Nothing” strategy, so
that the decision variables are initially non-basic.
List the variables across the top of the table and write the
objective function coefficient of each variable jut above it.
Write slack variables in the basis solution & decision variables in
non-basis with a value equals to zero.
There should be one row in the body of the table for each
constraint. List the slack variables in the basis column, one per
raw.
In the Cj column, enter the objective function coefficient of zero
for each slack variable. (Cj - coefficient of variable j in the
objective function)
Compute values for row Zj
Computer values for Cj – Zj.
44
 Step 3 cont’d
Basic Cj 60 50 0 0 0
variable
X1 X2 S1 S2 S3 RHSV Ratio

S1 0 4 10 1 0 0 100 100

S2 0 2* 1 0 1 0 22 22

S3 0 3 3 0 0 1 39 39

Zj 0 0 0 0 0 0

Cj-Zj 60 50 0 0 0 0

45
 Step 2 cont’d
Basic Cj 60 50 0 0 0
variable
X1 X2 S1 S2 S3 RHSV Ratio

S1 0 4 10 1 0 0 100 100/4 = 25

S2 0 2* 1 0 1 0 22 22/2 = 11

S3 0 3 3 0 0 1 39 39/3 = 13

Profit Zj 0 0 0 0 0 0 0
given
up

Cj-Zj 60 50 0 0 0 0 The net profit

(gained-givenup)

46
 Step 4. Develop subsequent tableaus
Follow the five steps until optimal solution is reached.
i. Identify the entering variable - a variable that has a largest
positive value in the Cj – Zj raw.
ii. Identify the leaving variable - Using the constraint coefficients or
substitution rates in the entering variable column divide each one
into the corresponding quantity value. The smallest non-negative
ratio that results indicate which variable will leave the solution.
iii.Compute the new value for the pivot row; divide the elements by
the pivot element.
iv.Calculate the new value for the remaining row using row
operations.
v. Compute Zj & Cj-Zj to determine whether it is optimal or not.
The table is optimal if the value of all Cj-Zj row zero & negative.
47
 Basic Terminologies
Basic feasible solution- zero for real variable &
the slack variables are equals to the RHS
Pivot row
Pivot column
Pivot element
Entering variable
Leaving variable
Basic variable- variables in the solution mix
Non-basic variable-
48
 Step 4. Find unique vectors for the new basic
variable using row operations on the pivot element.
Basic Cj 60 50 0 0 0
variable
X1 X2 S1 S2 S3 RHS Ratio
V
S1 0 0 8 1 -2 0 56 56/8 = 7
X1 60 1 1/2 0 1/2 0 11 11/. 5 = 22

S3 0 0 3/2 0 -3/2 1 6 6/1.5 = 4

Zj 60 30 0 30 0 660
Cj-Zj 0 20 0 -30 0 0

49
 Optimal tableau
Basic
variable Cj 60 50 0 0 0 Ratio
X1 X2 S1 S2 S3 RHSV

S1 0 0 0 1 6 -16/3 24
X1 60 1 0 0 1 -1/3 9
X2 50 0 1 0 -1 2/3 4
Zj 60 50 0 10 40/3 740
Cj-Zj 0 0 0 -10 -40/3

50
 Cont’d
Optimal solution:
X1 = 9
 X2 = 4
S1 = 24 hrs
 Z = Birr 740
“A simplex solution is a maximization problem
is optimal if the Cj – Zj row consists entirely of
zeros and negative numbers (i.e., there are no
positive values in the bottom row).”
51
 Cont’d
Note:
The variables in solution all have unit vectors in their
respective columns for the constraint equations.
Further, note that a zero appears in row c - z in every
column whose variable is in solution, indicating that
its maximum contribution to the objective function
has been realized.

52
 Minimization problems
Manual solution of minimization problems using simplex

method are handled in the same fashion as maximization

problem with mixed constraints.
The two key exceptions are:

M coefficients in the objective function must be assigned

a large positive number.

Selection of variables to enter the solution is based on the

largest negative value in row C-Z

5
3
 Example
Minimize Z= 7X + 9Y
Subject to: 3X + 6Y ≥ 36
8X + 4Y ≥ 64
X, Y ≥ 0

5
4
 In standard form
Minimize Z= 7X + 9Y + 0S1 + 0S2+MA1+MA2
Subject to: 3X + 6Y –S1 +A1 = 36
8X + 4Y –S2 + A2 = 64
All variables ≥ 0

5
5
 Initial table

BV CBV X Y S1 S2 A1 A2  
7 9 0 0 M M

A1 M 3 6 -1 0 1 0 36
A2 M 8 4 0 -1 0 1 64

Z 11M 10M -M -M M M 100M

C-Z 7-11M 9-10M M M 0 0  

5
6
 2nd table

BV CBV X Y S1 S2 A1 A2  
7 9 0 0 M M

A1 M 0 9/2 -1 3/8 1 0 12
X 7 1 1/2 0 -1/8 0 1/8 8

Z 7 7/2+9M/2 - M 3M/8 -7/8 M 7/8 56 + 12M

C-Z 0 11/2- 9M/2 M -3M/8 + 7/8 0 M-7/8  

5
7
 3rd Table

BV CBV X Y S1 S2  

7 9 0 0

Y 9 0 1 -2/9 1/12 8/3

X 7 1 0 1/9 -1/6 20/3

Z 7 9 -11/9 -5/12 212/3

C-Z 0 0 11/9 5/12  
5
8
 Maximization with mixed constraints
The simplex method requires that all the constraints

be in standard form.
Constraints that are ≤ can be put in to standard form

by adding a slack variable in the constraint.

Constraints with ≥or = sign are handled a bit

differently.

5
9
 Cont’d
To change equality constraints to standard form add

artificial variables
To covert this inequality to standard form subtract

surplus variable first and add artificial variable

6
0
 Solve using simplex method
Max! 6X + 8Y
Subject to: Y≤4
X+Y=9
6X+ 2Y ≥ 24
X, Y ≥ 0

6
1
 In standard form
Max! 6X + 8Y + 0S1 + 0S3 – MA2 – MA3
Subject to: Y+ S1 = 4
X+Y + A2 = 9
6X+ 2Y –S3 + A3 = 24
All variables ≥ 0

6
2
 Initial table

BV CBV X Y S1 S3 A2 A3 Quantity
6 8 0 0 -M -M

S1 0 0 1 1 0 0 0 4
A2 -M 1 1 0 0 1 0 9
A3 -M 6 2 0 -1 0 1 24

Z -7M -3M 0 M -M -M -33M

C-Z 6+ 7M 8+3M 0 -M 0 0  

6
3
 Second table

BV CBV X Y S1 S3 A2 A3 Quantity
6 8 0 0 -M -M

S1 0 0 1 1 0 0 0 4
A2 -M 0 2/3 0 1/6 1 -1/6 5
X 6 1 1/3 0 -1/6 0 1/6 4

Z 6 2-2M/3 0 -1M/6 -1 -M 1+M/6 24 - 5M

C-Z 0 6+2M/3 0 1+ M/6 0 -1-m/6  

6
4
 Third table

BV CBV X Y S1 S3 A2 Quantity

6 8 0 0 -M

Y 0 0 1 1 0 0 4
A2 -M 7/3
X 6 0 0 -2/3 1/6 1 8/3

1 0 -1/3 -1/6 0

6
5
Z 6 8 6 + 2M/3 -M/6 -1 -M 48 -7M/3
 Fourth table

BV CBV X Y S1 S3 Quantity

6 8 0 0

Y 8 0 1 1 0 4
S3 0 14
X 6 0 0 -4 1 5

6
6
 The Role of Sensitivity Analysis of the
Optimal Solution

Is the optimal solution sensitive to changes in

input parameters?
Possible reasons for asking this question:
Parameter values used were only best estimates.
Dynamic environment may cause changes.
“What-if” analysis may provide economical and
operational information.

6
7
 Sensitivity Analysis of
Objective Function Coefficients.

 Range of Optimality
 The range of optimality for each objective function coefficient
provides the range of values over which the current solution will
remain optimal.
◦ The optimal solution will remain unchanged as long as

 An objective function coefficient lies within its range of

optimality
 There are no changes in any other input parameters.

6
8
 Cont’d
Managerial attention should be focused on those
objective function coefficients that have a narrow
range of optimality and coefficients near the end points
of the range.
With these coefficients, a small change can necessitate
modifying the optimal solution

6
9
Sensitivity analysis helps to test the sensitivity of the optimum
solution with respect to changes of the coefficients in the
objective function, coefficients in the constraints inequalities, /
the constant terms in the constraints. Example;
The actual selling prices (or market values) of the two products
may vary from time to time. Over what ranges can these prices
change without affecting the optimality of the present solution?
Will the present solution remain the optimum solution if the
amount of raw materials, production time, or storage space is
suddenly changed because of shortages, machine failures, or
other events?
The amount of each type of resources needed to produce one
unit of each type of product can be either increased or
decreased slightly. Will such changes affect optimal solution ?
70
 Example
Consider:
Max! X1+ 2X2
Subject to: 2X1 + 3X2≤ 12
5X1 + 2X2 ≤ 15
X1, X2 ≥ 0
Solve using simplex method.

7
1
 Optimal solution

  1 2 0 0  
BV CB X1 X2 S1 S2 RHS
V
X2 2 2/3 1 1/3 0 4 
S2 0 11/3 0 -2/3 1 7 
 Z 4/3 2 2/3 0 8 
C-Z  -1/3 0 -2/3 0  
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2
 Cont’d
For all non-basic variables range of insignificance will
be given by -∞≤ Cj ≤ Z.
The non-basic variable will remain non-basic so long
as Cj ≤ Zj.
Hence, the range of insignicance for X1 is
-∞≤ Cj ≤ 4/3

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 For basic variable
 For variables which are in the solution, the
determination of range of optimality requires different
approach.
 The value in C-Z row must be divided by the
corresponding row values of the variable in question.
 The smallest positive ratio will indicate the allowable
increase and the smallest negative ratio (absolute value)
indicates the allowable decrease.
 If there is no positive ratio there is no upper limit in
variables objective function coefficient
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 Cont’d
 Therefore ratios calculated for the row are:

-1/2 Allowable decrease

0
No positive ratio; hence there is no
-2 upper limit
0/0

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 Cont’d
As you can see, the smallest negative ration (in terms
of absolute value) is -1/2 and there is no positive ratio.
Hence, the coefficient of X2 can be reduced by 0.5 and
increased indefinitely without making it non basic.

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 Cont’d
Therefore, the range of optimality for X2 is:
(2-0.5) ≤ C2 ≤∞ = 1.5 ≤ C2 ≤ ∞

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 Sensitivity Analysis of
Right-Hand Side Values
 a change in the right-hand side for a constraint may
affect the feasible region and perhaps cause a change in
the optimal solution to the problem
 In sensitivity analysis of right-hand sides of constraints
we are interested in the following questions:
◦ Keeping all other factors the same, how much would the
optimal value of the objective function (for example, the profit)
change if the right-hand side of a constraint changed by one
unit?
◦ For how many additional or fewer units will this per unit
change be valid?

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 Shadow price
Shadow prices are values in the Z row of the final
(optimal) simplex table.
It is a marginal value.
It shows the impact that a one unit change in the
amount of constraint would have on the value of the
objective function

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 60 50 0 0 0 RHS
Basis c X1 X2 S1 S2 S3
S1 0 0 0 1 6 -5.3333 24
X1 60 1 0 0 1 -0.3333 9
X2 50 0 1 0 -1 002/3 4
z 60 50 0 10 40/3 740
C-Z 0 0 0 -10 -13.333

Shadow prices
Negative of Shadow
8 prices
0
 From the above table one can clearly see that:
If resource one is increased by one unit, there would be
no effect on the profit.
If the second resource is increased by one unit, profit
will increase by ten birr and
If the third resource is increased by one unit, profit will
increase by 40/3 birr.
shadow prices do not tell us by how much the level of
scarce resources can be increased and still have the
same impact per unit

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 resources with positive shadow prices as scarce goods
(binding constraints) and resources with zero shadow
prices as free goods (surplus resource).
At some point, the ability to use additional resources
will disappear because of the fixed amounts of the other
constraints.
We need to determine the range over which we can
change the right hand side quantities and still have the
same shadow prices.
This is called range of feasibility/ right hand range

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 Sensitivity Analysis of
Right-Hand Side Values
Any change to the right hand side of a binding
constraint will change the optimal solution.

Any change to the right-hand side of a non-binding

constraint that is less than its slack or surplus, will
cause no change in the optimal solution.

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 Cont’d
To find range of feasibility for the right hand side,
divide the entries in the quantity column by associated
slack column values.
The smallest positive ratio indicates the allowable
decrease and negative ratio closest to zero indicates
allowable increase

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 Cont’d
 For the previous example:
For the first variable Allowable decrease
4/ (1/3) = 12
7/ (-2/3) = -21/2
 There are only two ratios one positive and Allowable
the other Increase
negative.
 Hence, the first resource can be reduced by 12 and
increased by 21/2.

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 Cont’d
 Hence, range of feasibility for resource one is:
0 ≤ b1≤ 45/2
Construct the range of feasibility for resource two.

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 For second constraint
4/0=undefined
7/1=7
Hence, 15-7≤b2≤∞
8 ≤b2≤∞ Allowable decrease

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 End of the slide
Thank you for your attention

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