1

BU275, Spring 2023, Class 16

Business Decision Models
Linear Programming: Introduction and Graphical Solution

Peruvemba S. Ravi
Exercise: The Beaver Creek Pottery
Company (a product mix problem)
Resource Requirements

Labor Clay Profit

product
(Hr./Unit) (Lb./Unit) ($/Unit)
Bowl 1 4 40
Mug 2 3 50

•How many bowls and mugs should be produced to maximize

profits given labor and materials constraints?
 3

Linear Programming
• Objectives of business decisions frequently involve
maximizing profit or minimizing costs.
• Linear programming uses linear algebraic relationships
to represent a firm’s decisions, given a business
objective, and resource constraints.
• Steps in application of LP:
1. Identify problem as solvable by linear programming.
2. Formulate a mathematical model of the unstructured
problem.
3. Solve the model.
Model Components
• Decision variables - mathematical symbols representing
levels of activity by the firm.
• Objective function - a linear mathematical relationship
describing an objective of the firm, in terms of decision
variables - this function is to be maximized or minimized.
• Constraints - requirements or restrictions placed on the
firm by the operating environment, stated in linear
relationships of the decision variables.
• Parameters - numerical coefficients and constants used
in the objective function and constraints.
Summary of Model Formulation Steps
Step 1: Define the decision variables

Step 2: Define the objective function

Step 3: Define the constraints

Formulation

Decision Variables:
x1 = number of bowls to produce per day
x2 = number of mugs to produce per day
Objective Function:
Maximize Z = $40x1 + $50x2
Where Z = profit per day
Resource Constraints:

1x1  2 x2 40 hours of labor

4 x1 + 3 x2 120 pounds of clay
Non-Negativity Constraints:
x1 0; x2 0
Formulation
Complete Linear Programming Model:

Maximize Z = $40 x + $50 x

1 2

subject to: 1x1 + 2 x2 40

4 x2 + 3 x2  120
x1, x2  0
Feasible Solutions
A feasible solution does not violate any of the constraints:

Example: x1  5 bowls
x2  10 mugs
Z  $40 x1  $50 x2 $700
Labor constraint check:
15  + 2 10  = 25  40 hours
Clay constraint check: 4 5  + 3 10  = 70 120 pounds
Infeasible Solutions
An infeasible solution violates at least one of the
constraints:
Example: x1  10 bowls
x2  20 mugs
Z  $40 x1  $50 x2  $1400
Labor constraint check:
110   2 20  50  40 hours
Maximization and Minimization LP Problems

• The Beaver Creek Pottery Company problem was an

example of a maximization problem.
• A problem that involves the minimization of costs, carbon
emissions, etc. would be a minimization problem.
 The Graphical Solution Method for LP Problems

• Graphical solution is limited to linear programming

models containing only two decision variables (can be
used with three variables but only with great difficulty).
• Graphical methods provide a picture of how a solution
for a linear programming problem is obtained.
• There are two versions of the Graphical Method.
Coordinate Axes (one for each decision
variable)

Maximize
Z = $40 x1 + $50 x2
subject to: 1x1 + 2 x2 40
4 x2 + 3 x2  120
x1, x2  0

Figure 2.2 Coordinates for graphical analysis

Labor Constraint
Figure 2.3 Graph of labor constraint
Labor Constraint Area
Figure 2.4 Labor constraint area
Clay Constraint Area
Figure 2.5 The constraint area for clay
Both Constraints
Figure 2.6 Graph of both model constraints
Feasible Solution Area (or Feasible Region)
Figure 2.7 The feasible solution area constraints
Version 1 of the method: Construct objective function lines.

Figure 2.8 Objective function line for Z = $800

Alternative Objective Function Solution
Lines
Figure 2.9 Alternative objective function lines for profits, Z, of $800, $1,200, and $1,600
Optimal Solution

The optimal solution

point is the last point the
objective function
touches as it leaves the
feasible solution area.

Figure 2.10 Identification of optimal solution point

Optimal Solution Coordinates
Figure 2.11 Optimal solution coordinates
Graphical Solution Method: Second Version
Find the value of the objective function at all corner points.
The optimal solution is guaranteed to lie at a corner point of the feasible region.

Figure 2.12 Solutions at all corner points

A Change in the Objective Function
• Now assume that the objective function is changed to
Z = $70x1 + $20x2 .
Optimal Solution for a New Objective Function

Maximize
Z = $70 x1 + $20 x2
subject to: 1x1 + 2 x2 40
4 x2 + 3 x2  120
x1, x2  0

Figure 2.13 Optimal solution with Z 70 x1  20 x2

 25

Slack Variables
• Standard form requires that all constraints be in the form
of equations (equalities).
• A slack variable is added to a  constraint (weak
inequality) to convert it to an equation (=).
•A slack variable
typically represents an unused resource.
•A slack variable
contributes nothing to the objective function value.
Linear Programming Model: Standard
Form
Max 40x1+50x2 + 0s1 + 0s2

subject to: 1x1  2 x2  s1  40

4 x2  3 x2  s2 120
x1, x2 , s1, s2 0

Where:
x1 = number of bowls
x2 = number of mugs
s1, s2 are slack variables
Figure 2.14 Solutions at points A, B, and C
with slack
A Minimization LP Problem
• Two brands of fertilizer Figure 2.15 Fertilizing farmer’s field
available – Super-gro,
Crop-quick.
• Field requires at least 16
pounds of nitrogen and 24
pounds of phosphate.
• Super-gro costs $6 per bag,
Crop-quick $3 per bag.
• Problem: How much of
Chemical Contribution
each brand should be
purchased to minimize the Brand Nitrogen Phosphate
total cost of fertilizer given (lb./bag) (lb./bag)
the data in the table. Super-gro 2 4
Crop-quick 4 3
LP Model Formulation
Decision Variables:
x1 = bags of Super-gro
x2 = bags of Crop-quick
The Objective Function:
Minimize Z = $6x1 + 3x2
Where: $6x1 = cost of bags of Super-Gro
$3x2 = cost of bags of Crop-Quick
Model Constraints:
2 x1  4 x2 16 lb nitrogen constraint 
4 x1  3 x2 24 lb phosphate constraint 
x1, x2 0 non - negativity constraint 
Constraint Graph

Minimize
Z = $6 x1 + $3 x2
subject to: 2 x1 + 4 x2 16
4 x2 + 3 x2  24
x1, x2  0

Figure 2.16 Constraint lines for fertilizer model

Feasible Region
Figure 2.17 Feasible solution area
Optimal Solution Point (obtained using the
first version of the Graphical Method)

Figure 2.18 The optimal solution point

 32

Surplus Variables
• A surplus variable is subtracted from a constraint
 to convert
it to an equation (=).
•A surplus variable
represents an excess above a constraint requirement level.
•A surplus variable
contributes nothing to the calculated value of the objective
function.
•Subtracting surplus
variables in the farmer problem constraints:
2 x1  4 x2  s1 16 nitrogen 
4 x1  3 x2  s2 24 phosphate 
Graphical Solution
Minimize
Z $6 x1  $3 x2  0s1  0s2
subject to: 2 x1  4 x2 – s1 16
4 x2  3 x2 – s2 24
x1, x2 , s1, s2 0

Figure 2.19 Graph of the fertilizer example

Irregular Types of Linear Programming
Problems
For some linear programming models, the general rules do
not apply.
Special types of problems include those with:
• Multiple optimal solutions
• Infeasible solutions
• Unbounded solutions
Multiple Optimal Solutions
The objective function is
parallel to a constraint line.
Maximize Z $40 x1  30 x2
subject to: 1x1  2 x2  40
4 x2  3 x2 120
x1, x2 0

Where:
x1 = number of bowls Figure 2.20 Graph of the Beaver Creek
x2 = number of mugs Pottery example with multiple optimal
solutions
An Infeasible Problem
Every possible solution
violates at least one
constraint:
Maximize Z 5x1  3x2
subject to: 4 x1  2 x2 8
x1  4
x2 6
x1, x2 0

Figure 2.21 Graph of an infeasible problem

An Unbounded Problem
Value of the objective
function increases
indefinitely:
Maximize Z  4x1  2x2
subject to: x1 4
x 2 2
x1, x2 0

Figure 2.22 Graph of an unbounded problem