LINEAR PROGRAMMING

Economics basically revolves around “How the maximum possible satisfaction of the people can
be achieved through proper allocation of scarce or limited resources among different uses?”

In order to solve some practical problems, especially decision-making by the business firms, the
technique of Linear Programming has been developed.

What is Linear Programming?

Every firm has certain requirements and targets to achieve and to fulfill those requirements there
are some variables responsible. Besides, since the resources are limited, there are certain
constraints these variables are subjected to. Linear programming is a mathematical technique
which helps to determine the way to achieve the best outcome such as maximum profit or lowest
cost. Linear Programming considers only linear relationship between two or more variables. By
linear relationship we mean that relations between the variables can be represented by straight
lines. Programming means planning or decision-making in a systematic way.

“Linear Programming refers to a technique for formulating & solving problems in which some
linear function of two or more variables is to be optimized, subject to a set of linear constraints,
at least one of which must be expressed as inequality.”

Applications of Linear Programming:

Linear Programming is used to solve problems in many aspects of Business Administration

Application of Linear Programming to the theory of the firm for the above applications explains
how the firm will decide about the output and processes it will choose, given the prices of both
inputs and products. Thus, in the analysis of the firm conducted through linear programming, it is
assumed that prices for the products produced as well as inputs used by them will remain
constant. With the given constant prices of inputs and outputs, linear programming provides
numerical solution to the problem of making optimum choice by the firm when it has to work
within certain given constraints. The optimization can refer to either maximization or
minimization. For instance, objective may be maximization of profits for a given level of outlay
OR minimization of cost for a given level of output. Optimization and choice are thus central
features of linear programming problem.

There are basically two ways of solving a problem of Linear Programming:

1. Graphical Method:
It is the non-mathematical method of obtaining the optimal solution. It can handle only
simple linear programming problems.

2. Simplex Method:
Developed by Dr.Dantzing, this method is remarkable due to its efficiency and
calculating facility. It involves a set of successive mathematical calculations with which
feasible solutions are successively tested during which poorer solutions are successively
eliminated until ultimately the optimum solution is obtained. Thus, it uses mathematical
and computational procedure to find out the optimal solution for the problem in the
question. The simplex method can be used where distributions method cannot. Therefore
the field of application is quite broad. In complex cases this method saves time and effort
by taking us to the optimal solution in a finite number of steps.

The Standard Form:

Standard form is the usual form of describing a Linear Programming problem. It consists of
the following three parts:

1. A linear function to be maximized

2. Problem constraints of the following form:

e.g. a11x1 + a12x2 ≤ b1

a21x1 + a22x2 ≤ b2

a31x1 + a32x2 ≤ b3

3. Non-negative variables
 e.g. X1 ≥ 0

X2 ≥ 0

An Example with high grade of reality:

Suppose we are running a football club and launching a new merchandising campaign and we
have to decide the quantity of scarves and shirts produced, considering current constraints.

The sale prices of shirts and scarves are Rs.35 and Rs.10 respectively; also we know the
maximum annual manufacture capacity is 2000 units.

Secondly, four times more time is needed to sew a shirt compared with a scarf having at the most
2300 hours a year.

And finally, space is limited up to 2500 square inches, requiring shirts and scarves, 3 and 2
square inches respectively.

Our objective is that the incomes must be maximized knowing the different prices of scarves and
shirts but some limitations have been set which are called constraints, in this case limitations are
related with capacity, time and sales space.

Now, we arrange this data in ‘The Standard Form’:

We take X = Shirts & Y = Scarves

Objective function: 35X+10Y (Should be maximized)

Constraints:

1. Capacity:- X+Y ≤ 2000

2. Time:- 4X+Y ≤ 2300

3. Sales Space:- 3X+2Y ≤ 2500

Non negativity Variables:

X ≥ 0, Y ≥ 0

So, in this way a problem can be converted into a Standard form. Now we will consider a
problem in Standard Form and solve using the Graphical Method.
Graphical Method Of Linear Programming:

Problem in Standard Form:

Maximize Z = f(x,y) = 3x + 2y

Subject to the following constraints: 2x + y ≤ 18

2x + 3y ≤ 42

3x + y ≤ 24

x≥0,y≥0

Steps to follow:

1. Initially we draw the coordinate system correlating to an axis the variable x, and the other axis
to variable y, as can see in the figure.

2. We now mark the constraints in the graph one by one. The first, is the segment that joins A
with B and the region that this constraint delimits is indicated by the YELLOW color. This
process is repeated in the same way with the second and further constraints, and they delimit the
BLUE and RED regions respectively. The feasible region is the intersection of regions delimited
by all these constraints and for the conditions of no negativeness of variables, that is, for the
region of admissible values limited by both coordinated axes. The feasible region is represented
for the convex polygon O-F-H-G-C, emergent of VIOLET color.

3. As G point provides the bigger value to the objective Z, such point constitutes the optimal
solution, we will indicate x = 3; y = 12, with optimal value Z = 33.
Extreme point Coordinates (x,y) Objective value(Z)
O (0,0) 0
C (0,14) 28
G (3,12) 33
H (6,6) 30
F (8,0) 24