CHAPTER TWO

LINEAR PROGRAMMING: Application

and Model
Formulation

1
 The term linear implies that all the
mathematical relations used in the problem
are linear or straight-line relations,
 while the term programming refers to the
method of determining a particular program or
plan of action, i.e., the use of algorithms that is
a well defined sequence of steps that will lead
to an optimal solution.
 The term 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.
2
 2.1. LINEAR PROGRAMMING
MODELS
• LP models are mathematical representations
of LP problems.
2.1.1. COMPONENTS OF LP MODELS
• There are four major components of LP
models including:
i. Objective function
ii. Decision variables
iii. Constraints and
iv. Parameters.

3
i. Objective and Objective Function
• It is the criterion by which all decisions are
evaluated.
• It provides the focus for problem solving.
• In linear programming models, It focuses
on decision-making based on constraints.
It is a real-valued function that is either to
be maximized or minimized depending
upon the constraints. Hence, every LP
problem will be either maximization or a
minimization problem.

4
ii. Decision variables
• They represent unknown quantities to be solved for.
• The decision maker can control the value of the objective, which is
achieved through choices in the levels of decision variables.
• The variables whose values are to be found out.
• For example, how much of each product should be produced in order to
obtain the greatest profit?
iii. Constraints
• They are basically the conditional equations that govern the Linear
function.
• The restrictions may reflect:
 availabilities of resources (e.g., raw materials, labor time, etc.),
 legal or contractual requirements (e.g., product standards, work
standards, etc.),
 technological requirements (e.g., necessary compressive strength or
tensile strength)
 other limits based on forecasts, customer orders, company policies, etc.
5
• 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.
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 a negative value. 6
iv. Parameters
• The objective function and the constraints
consist of symbols that represent the decision
variables (e.g., X1, X2, etc.) and numerical
values called 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 it pertains to as well as the
numerical value of each constraint.

7
• The following simple example illustrates the
components of LP models:

8
2.1.2. ASSUMPTIONS OF LP MODELS
a)Linearity (proportionality)
• The linearity requirement is that each decision
variable has a linear impact on the objective function
and in each constraint in which it appears.
• The basic assumption underlying the linear
programming is that any change in the constraint
inequalities will have the proportional change in the
objective function.
• This means, if product contributes Rs 20 towards the
profit, then the total contribution would be equal to
20x , where x is the number of units of the product.
1 1

• For example, if there are 5 units of the product, then

the contribution would be Rs 100 and in the case of
10 units, it would be Rs 200. Thus, if the output
(sales) is doubled, the profit would also be doubled.

9
b) Certainty
• Another underlying assumption of linear
programming is a certainty, i.e. the
parameters of objective function coefficients
and the coefficients of constraint inequalities
is known with certainty.
• Such as profit per unit of product, availability
of material and labor per unit, requirement of
material and labor per unit are known and is
given in the linear programming problem.

10
c) Additivity
• This asserts that the total profit of the objective
function is determined by the sum of profit
contributed by each product separately.
• Similarly, the total amount of resources used is
determined by the sum of resources used by each
product separately.
• This implies, there is no interaction between the
decision variables.
• For example, the total profit earned from the sale
of two products A and B must be equal to the
sum of the profits earned separately from A and B.
• Similarly, the amount of a resource consumed for
producing A and B must be equal to the sum of
resources used for A and B respectively.
11
d) Non-negativity
• It assumes that negative values of decision
variables are unrealistic and, therefore, will
not be considered in any potential solutions.
• Only positive values and zero will be allowed
and the non-negativity assumption is
inherent in LP models.

12
2.1.3. Advantages of Linear Programming
1. Optimization of resources – Linear
programming helps us make the most of our
resources, such as time, money, and materials, by
finding the most efficient solutions to problems.
2. Predictive power – Linear programming allows
us to forecast the potential outcomes of different
decisions, helping us plan for the future and make
informed choices.
3. Streamlined decision-making – By breaking
complex problems down into manageable parts
and finding the optimal solution, linear
programming can make it easier to make difficult
decisions. 13
4. Improved resource allocation – Linear
programming can help us allocate our resources in
the most effective way, ensuring that they are used
to their full potential.
5. Enhanced competitiveness – By using linear
programming to optimize our operations, we can
become more competitive in the market,
outshining our competitors and achieving success.
6. Highlighting of bottlenecks in the production
process. For example, when a bottleneck occurs,
some machines cannot meet demand while others
remain idle for some of the time.

14
2.1.4. Limitations of Linear Programming
1. Limited scope – Linear programming is only
effective for solving certain types of problems and
may not be suitable for more complex or non-linear
situations.

2. Assumption of linearity – Linear programming

relies on the assumption that all relationships
within a problem are linear, which may not always
be the case in real-world situations.

3. Difficulty in solving large-scale problems –

Linear programming can become increasingly
complex and time-consuming to solve as the size
and scope of a problem grows, making it less
practical for larger-scale applications.
15
4. A LP model does not take into
consideration the effect of time and
uncertainty. Thus, the LP model should be
defined in such a way that any change due
to internal as well as external factors can
be incorporated.
5. It deals with only with a single objective,
whereas in real-life situations we may
come across conflicting multi-objective
problems.

16
2.1.5. FORMULATING LP MODELS
 Linear programming algorithms (solution
techniques) are widely used and understood
and computer packages are readily available
for solving LP problems. Consequently,
obtaining solutions is not the real issue, what
is very important to note is failure to check
that all constraints have been accounted for
and have been correctly formulated results in
ill-structuring of the model that can easily
lead to poor decisions.

17
Steps in formulating LP models:

Step 1. Identify the type of problems (maximization

or minimization)
2. Write down the decision variables of the
problem.
3. Formulate the objective function to be
optimized (Maximized or Minimized) as a linear
function of the decision variable.
4. Formulate the other conditions of the problem
such as resource limitation, market constraints.
5. Add non negativity constraints from the
considerations.
6. Develop LPM 18
2.2. LINEAR PROGRAMMING APPLICATIONS
• This discussion is only meant to give an indication of
the LP techniques for managerial decision making
and the apparent diversity of situations to which linear
programming can be applied.
• Some of these include:
 production management (product mix, blending problems,
production planning, Assembly line balancing…).
Marketing management (media selection, traveling sales
man problem, physical distribution).
Financial management (portfolio selection, profit planning)
agricultural application
military applications
personnel management (staffing problem, Determination
of equitable salary and etc.

19
Examples(Problem formulation)
Product Mix
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.

20
Processes Power Traction
Transformer Transformer
Core preparation 75 15
Core to Coil 160 30
Assembly
Vapor Phase Drying 45 10

If the capacities available are 1000, 1500, and 750

machine hours in each processes respectively,
formulate the problem as LP?
21
Solution
Step1. Identify decision variables
• Since the products to be produced are power
and traction transformers using the available
resource to attain the objective set, we
consider them as decision variables.
• This is because the organization’s problem
here is how many of each product to produce
in order to attain the objective, which requires
the management decision.
Let X1 = the no of power transformers to be
produced.
X2= the no of traction transformer to be
produced
22
Step2. Determine Objective Function
From the problem above, we understand that the
problem is maximization problem.
Hence,
Zmax=50,000X1+ 10,000X2
• This is because, each unit of X1 contributes
Birr 50,000 and X2 contributes Birr 10,000 to
objective function.
Step 3. Identify constraints
• Here we have two constraints: structural and
non-negativity constraints.
• The structural constraint is the amount of
machine hours available in each process.
23
Step 4.Determining Parameters
Parameters are already identified in the table of
the problem.
Note: Step 3 and 4 can be performed
simultaneously as:
75X1 + 15X2< 1000 hrs- Core preparation process
160X1 + 30X2< 1500 hrs- Core to Coil Assembly Machine hour
const.
45X1 + 10X2< 750 hrs- Vapor Phase Drying
X 1, X 2 > 0

24
Step 5. Building and validating the model
Zmax=50,000X1+ 10,000X2
Subject to:
75X1 + 15X2< 1000 hrs
160X1 + 30X2< 1500 hrs
45X1 + 10X2< 750 hrs
X1, X2 > 0

25
Exercise two
• A resourceful home decorator manufactures
two types of lamps says A and B. Both lamps
go through two technician’s first a cutter,
second a finisher. Lamp A requires 2 hrs of
the cutter’s time and 1 hr of the finisher’s time,
while lamp B requires 1hr of the cutter’s time
and 2 hr of the finisher’s time. The cutter has
104 hrs and finisher has 76 hrs of available
time each month. Profit per lamp A is birr 600
and per B lamp is birr 1100. Assuming that he
can sale that entire he produces, how many
of each type of lamps should be
manufactured to obtain the best return.

26
 Solution: Formulation of the
Mathematical Model of the Problem
Lamps Cutter Finisher Maximum profit

A 2hr 1hr 600

B 1hr 2hr 1100

Available time 104hr 76hr

Solution let Lamp A= X1 and lamp B= X2

The LPM will be
Z max = 600x1 + 1100x2
Stc: 2x1 + x2 ≤ 104
x1 + x2 ≤ 76
x1, x2 ≥ 0
27
 Exercise three
• Alem private limited company is engaged in the
production of belts and leather jackets. Both of
products require two inputs (chemical and
processed leather). Each unit of belt requires 2 liters
of chemical and 4 kilogram of processed leather
while, to produce one unit of jacket the company
requires 4 liters of chemical and 3 kilograms of
processed leather. The company should start the
production if the total liters of chemical are more
than 16 and processed leather more than 24
kilograms to fulfill the minimum requirement to
license. Finally the unit production cost for Belt is
birr 60 and the unit production cost for Jacket is birr
90. Develop LPM 28
Solution let X1= belt and X2= jacket
Z min= 60X1+ 90X2
STC; 2X1+ 4X2>16
4X1+3X2>24
X1, X2>0

29
2.3. Solving LP Model
• Following the formulation of a mathematical
model, the next stage in the application of LP to
decision making problem is to find the solution of
the model.
• An optimal, as well as feasible solution to a LP
problem is obtained by choosing from several
values of decision variables x1,x2…xn , the one set
of values that satisfy the given set of constraints
simultaneously and also provide the optimal
(maximum or minimum) values of the given
objective function.
• The most common solution approaches are:
 Graphical approach
 algebraic approach(simplex method) 30
2.3.1. 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 provides a visual portrayal of many
important concepts.
 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. 31
 Steps to solve LPM with Graphic method

• Step 1: develop LPM (if it is not formulated).

• 2: change inequalities in to equation.
• 3: find X1 and X2 coordinates. Assign X1
zero and find X2 then assign X2 zero and find
X1.
• 4: Plot each equation on the graph as each
equation will geometrically represent a
straight line.
• 5: Shade the feasible region and identify the
feasible solutions
32
• Every point on the line will satisfy the equation of line.
If the inequality constraints corresponding to that
line is ≤ then the region below the line lying in the
first quadrant (due to non-negativity of variables) is
shaded.
• For the inequality constraints with ≥ sign the region
above the line in the first quadrant is shaded. The
point lying in common region will satisfy all the
constraints simultaneously. Thus, the common
region obtained is called feasible region. This region
is the region of feasible solution.

33
• Step 6: identify the corner points of this
region are identified.
• Step 7: Finding the optimal solutions
• The value of Z at various corners points of
the region of feasible solution is
calculated. The optimum (maximum or
minimum) Z among these values is noted.
Corresponding solution is the optimal
solution.
• Step 8: interpret the result.

34
Important Definitions
Solution
-The set of values of decision variables xj (j = 1,2,…, n)
which satisfy the constraints of a LP problem is said to
constitute solution to that LP problem.
Feasible solution
- The set of values of decision variables xj (j = 1,2,…, n)
which satisfy all the constraints and non- negativity
conditions of a LP problems simultaneously is said to
constitute the Feasible solution to that LP problem.

35
Infeasible solution
The set of values of decision variables x (j = 1,2,…, n)
j

which do not satisfy all the constraints and non-

negativity conditions of a LP problems
simultaneously is said to constitute the infeasible
solution to that LP problem.
Basic solution
For a set of ‘m’ simultaneous equations in ‘n’
variables
(n>m), a solution obtained by setting ( n-m) variables
equal to zero and solving for remaining ‘m’ equations
in ‘m’ variables is called a basic solution.
• The (n-m) variables whose value did not appear in
this solution are called non-basic variables and the
remaining m variables are called basic variables.36
Basic feasible solution
A feasible solution to LP problem which is also
the basic solution is called the basic feasible
solution. That is, all 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.

37
Optimal Basic feasible solution
- A basic feasible solution which optimizes the objective
function value of the given LP problem is called an
optimal basic feasible solution.
Unbounded solution
- A solution which can increase or decrease the value of
the LP problem indefinitely is called an unbounded
solution.
Example
• In order to demonstrate the method, let us take a
micro-computer problem in which a firm is about to
start production of two new micro-computers, X and X .
1 2

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:
38
 Type 1 Type 2
Profit per unit $60 $50
Assembly time per 4 hrs 10 hrs
unit
Inspection time per 2 hrs 1 hrs
unit
Storage space per 3 cubic 3 cubic
unit feet feet
39
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, X2 > 0
40
Graphical solution method involves the following steps.
Step 1. Plot each of the constraints
 The step begins by plotting the non-negativity constraint,
which restricts our graph only to the first quadrant. We
then can deal with the task of graphing the rest of the
constraints in two parts.
 For example, let us take the first constraint
4X + 10X < 100 hrs.
1 2

- First we treat the constraint as equality: 4X + 10X = 100.

1 2

-Then identify the easiest two points where the line

intersects each axis by alternatively equating each decision
variable to zero and solving for the other: when X =0, X
1 2

becomes 10 and when X = 0, X will be 25.

2 1

- We can now plot the straight line that is boundary of the

feasible region as we have got two points (0, 10) and (25,0).

41
42
Step 2. Identify the feasible region
• The feasible region is the solution space that
satisfies all the constraints simultaneously.
• It is the intersection of the entire region
represented by all constraints of the problem.
• We shade in the feasible region depending on
the inequality sign.
• In our example above, for all the constraints
except the non-negativity constraint, the
inequality sign is ‘less than or equal to’ and it
represents region of the plane below the
plotted lines. 43
44
Step 3. Locate the optimal solution.
• The feasible region contains an infinite number
of points that would satisfy all the constraints
of the problem. The Point that will make the
objective function optimum will be our optimal
solution. This point is always found among the
corner points of the solution space.
• Once the constraints are plotted and feasible
region is determined, we use the Extreme Point
approach to find a solution for LP model
consisting of only two decision variables:

45
2.3.1.2. 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, while in the case of
multiple solutions, at least one will occur at a
corner point as these multiple solutions will be
combinations of those points between two
corner points.
• The necessary steps for this approach is after
graphing the problem, we determine the values
of the decision variables at each corner point
of the feasible region either by inspection or
using simultaneous equations.
46
 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.
i) Extreme Method of Solving Maximization
Problems with < constraint
• Maximization of objective function involves
finding the point where the combination of
products results in maximum value of objective
function. The constraints are connected with <
sign.
• The solution space lies below the slant line and
is bounded by the line segments. The origin and
other points below the slant lines are in the
solution space (i.e., feasible region). 47
 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.
48
Interpretation
For a firm to maximize its profit (740), it should
produce 9 units of the Model I microcomputer
and 4 units of model II.
Activity
what are the values of decision variables
at each corner point? (Hint: Solve
simultaneously those lines which intersected
each other).

49
ii) Extreme Method of Solving Minimization
Problems with >constraints

 Solving minimization problems involve where the

objective functions (like cost function) will be
minimum.
• The constraints are connected to RHS values with >
sign. But, in real world problems, mixes of constraint is
also possible. The value of RHS involves the lowest
value of the constraint.
• The solution space lies above the slant lines and it is
not enclosed. It extends indefinitely above the lines in
the first quadrant. This means simply that cost
increases without limit as more and more units are
produced.
• The minimum cost will occur at a point along the inner
boundary of the solution space. The origin and other
points below the lines are not in the solution space. 50
Example
Zmin= 0.1x+0.07y
Subject to:
6x+2y > 18
8x+10y > 40
y>1
x,y > 0
Find the values of x and y which makes the
objective function minimum?

51
Solution
Coordinates OF

Corner point x y
Zmin=0.1x+0.07y

A 0 9 0.63

B 25/11 24/11 0.38

C 15/4 1 0.445

52
2.3.1.3. Graphical Solutions for the Special
Cases of LP
i) Unboundedness
• Unboundedness occurs when the decision
variable increased indefinitely without
violating any of the constraints.
• The reason for it may be concluded to be
wrong formulation of the problem such as
incorrectly maximizing instead of minimizing
and/or errors in the given problem.
• Checking equalities or rethinking the problem
statement will resolve the problem.
53
Max Z = 10X1 + 20X2
Subject to 2X1 + 4X2> 16
X1 + 5X2>15
X1, X2> 0

54
ii) Redundant Constraints
• In some cases, a constraint does not form a
unique boundary of the feasible solution
space. Such a constraint is called a
redundant constraint.
• A constraint is redundant if its removal would
not alter the feasible solution space.
• Redundancy of any constraint does not
cause any difficulty in solving a LP problems
graphically.
• Constraints appear redundant when it may be
more binding (restrictive) than others.
55
56
iii) Infeasibility
• In some cases after plotting all the constraints
on the graph, feasible area (common region) that
represents all the constraint of the problem
cannot be obtained.
• In other words, infeasibility is a condition that
arises when no value of the variables satisfy all
the constraints simultaneously. Such a problem
arises due to wrong model formulation with
conflicting constraints.
For example,
Max Z = 3X1+2X2
Subject to: 2X1 + X2 < 2
3X1 + 4X2 > 12
X1 , X2 > 0
57
58
iv) Multiple optimal solutions
 The optimum solution is that extreme point for
which the objective function has the largest value.
 It is of course possible that in a given problem
there may be more than one optimal solution.
 There are two conditions that should be satisfied
for an alternative optimal solution to exist:
a) The given objective function is parallel to a
constraint that forms the boundary of the feasible
region. The slope of an objective function is the
same as that of the constraint forming the boundary
of the feasible region.
b) The constraint should form a boundary on the
feasible region in the direction of optimal movement
of the objective function. The constraint should be
an active constraint. 59
Note: The constraint is said to be an active or
binding or tight, if at optimality the left hand
side equals the right hand side. In other words,
an equality constraint is always active. An
inequality sign may or may not be active.
For example;
Max Z = 8X1+16X2
Subject to: X1 + X2 < 200 ……. C1
3X1 + 6X2 < 900 ……. C2
X2 < 125 ……. C3
X1, X2 >0 60
61
 In the problem above, using extreme point
method and solving for values of corner points
simultaneously, the objective function assumes
its maximum value of 2,400 at two corner points
B (50,125) and C (100,100).
 Therefore, the optimal solution is found on the
line segment connecting the two corner points.
One benefit of having multiple optimal solutions
is that for other (perhaps qualitative) reasons, a
manager may prefer one of them to the others,
even though each would achieve the same value
of the objective function.
 In practical terms, one of the two corner points is
usually chosen because of ease in identifying its
values.
62
SLACK VERSUS SURPLUS
• Slack is the amount of a scarce resource that is
unused by a given solution.
• Slack can potentially exist in a < constraint.
• Slack variables are considered in the objective
function by using a coefficient of zero for each
of them.
• When all the constraints are written as equalities
after adding a slack variable to each of them, the
linear program is said to be in standard form.
• For example, in the Assembly constraint:-
4X1 +10X2 < 100 hrs, the slack value is 100 – [4(9)
+10(4)] = 24.

63
• Surplus on the other hand is the amount by
which the optimal solution causes a >
constraint to exceed the required minimum
amount.
• It can be determined in the same way that slack
can, i.e., substitute the optimal values of the
decision variables into the left side of the
constraint and solve.
• The difference between the resulting value and
the original right hand side amount is the
amount of surplus.
• Surplus should also be accounted for in the
objective function by using coefficients of zero
like wise.
64
2.3.2. THE SIMPLEX METHOD

The graphical method of solving linear

programming problems is a simple way to find a
solution since the optimum solution is searched
among the corner points of the solution space.
However, the graphical method is restricted to
problems with two decision variables.
When the number of variables and the number
of constraints increase, it becomes difficult to
visualize the solution space.
In order to avoid this limitation, the simplex
method, or step by step method is efficient
method for solving linear programming problems,
which was developed by George B.Datzing in
1947. 65
The simplex method is an algebraic procedure
that starts with a feasible solution that is not
optimal and systematically moves from one
feasible solution to another until an optimal
solution is found.
Constraints are generally expressed using
inequalities either in ‘less than’ or ‘greater than’
or in mixed form. Thus, constraints are not in
standard form, meaning they should be
converted into equalities.
To convert the inequality constraint into
equality, we introduce slack or surplus variables.
In economic terminology, slack variables
represent unused capacity and surplus
variables represent excess amount.
66
The contribution (cost or profit) associated
with the slack and surplus variables is zero.
An inequality of the ‘less than or equal to’ type
is transformed into equality by introducing a
non-negative slack variable, as follows: -
Example:
Non- Standard form Standard
form
X1+2X2<= 6
X1+2X2+S1= 6
, where X1 and X2 are decision variables and S1 is
a slack variable, added to the smaller side of the
inequality.
67
On the other hand, an inequality with ‘greater than or
equal to’ type is changed into equality by subtracting
surplus variable as follows: -
Example
Non Standard form Standard form
X +2X >=6
1 2 X +2X - S =6
1 2 1

, where X & X are decision variables and S is a

1 2 1

surplus variable, subtracted from the greater side of

the inequality.
• since both the slack and surplus variables are
insignificant with no contribution in the objective
function, they are represented with coefficient of
zero in the objective function.

68
To find a unique solution, the number of
variables should not exceed the number of
equations.
When the number of variables is more than the
number of equations, the number of solutions
is unlimited. So as to get a unique solution, we
have to set at least (n-m) variables to zero,
where n is the number of variables and m is the
number of equalities.
Those variables that are set to zero are called
non basic variables indicating they are not in
the solution. The variables that are in solution
are called basic variable.

69
 • To demonstrate the simplex method, we will use
the microcomputer problem with the following
objective function and constraints. The
Microcomputer Problem, which was discussed in
graphic approach, can be standardized as:
Max. Z = 60X +50X2+0S1+0S2+0S3
1

Subject to 4X +10X +S = 100

1 2 1

2X +X +S = 22
1 2 2

3X +3X +S = 39
1 2 3

, where X & X are decision variables and S , S & S are

1 2 1 2 3

slack variables.
• Here, the number of variables (5) is greater than
the number of equations (3). Therefore, the
decision variables are set to zero and we have X = 1

0, X = 0,
2

S = 100, S = 22, and S = 39.

1 2 3
70
 This solution will serve as an initial feasible
solution. An initial feasible solution is a first
solution used to generate other basic feasible
solutions.
 The initial basic feasible solution is obtained
by setting all the decision variables to zero.
 As a result, the initial basic feasible solution
is entirely composed of the slack variables.
X1& X2 are non basic variables since they are
not in solution. S1, S2& S3 are basic variables
since they are in solution.
71
 A tableau is a system of displaying the basic
feasible solution, the constraints of the
standard linear programming problem as well
as the objective function in a tabular form.
 A tableau is useful in summarizing the result
of each iteration, i.e. the process of moving
from one solution/corner to another solution/
corner in order to select the optimal solution.

72
 THE SIMPLEX ALGORITHM
2.3.2.1. Maximization case
The solution steps of the simplex method can be
outlined as follows:
Step1. Formulate the linear programming model
of the real world problem, i.e., obtain a
mathematical representation of the problem's
objective function and constraints.
Step2. Express the mathematical model of L.P.
problem in the standard form by adding slack
variables in the left-hand side of the constraints
and assign a zero coefficient to these in the
objective function.
73
Thus, we can restate the problem in terms of
equations:
Maximize Z = C1X1+ C2X2 + ...+ CnXn + OS1 + OS2 +...
+0Sm
Subject to a11X1+a12X2+... + a1nxn+ s1 =b1
a21X1+ a22X2+... + a2nXn+ S2 = b2
amlXl + am2 X2 +... + amNxn + Sm =
bm
, where X1, X2... Xn and S1, S2 ... Sm are non-
negative.
74
• Note that the slack variables have been assigned
zero coefficients in the objective function. The
reason is that these variables typically contribute
nothing to the value of the objective function.
Step 3. Design the initial feasible solution.
An initial basic feasible solution is obtained by
setting the decision variables to zero.
X1= X2 = ... = Xn = 0. Thus, we get S1 = b1, S2 = b2 ...
Sm = bm .
Step 4. Set up the initial simplex tableau.
For computational efficiency and simplicity, the
initial basic feasible solution, the constraints of the
standard LPP as well as the objective function can
be displayed in a tabular form, called the simplex
tableau as shown below:
75
Initial Simplex Tableau
Cj C1, C2 ... Cn, 0 0 ... 0 Quantity Ratio

(Contribution Per Column XB/amn

Unit)
Basic CB X1, X2, ... Xn S1 S2 ... b(=Xj)
variables
Sm
S1 CB1 a11 a12 ... a1n 1 0 ... b1=Xb1

0
S2 CB2 a21 a22 ... a2n 0 1 ... b2=Xb2

0
Sm CBm am1 am2…amn 0 0 ... bm=Xbm

1 76
• The interpretation of the data in the above
tableau is given as under. Other simplex
tableau will have similar interpretations:
• In the first row labeled "Cj", we write the
coefficients of the variables in the objective
function. These values will remain the same in
subsequent tableaus.
• The second row shows the major column
headings.
• In the first column of the second row, under the
label "Basic variables" (also called Product mix
column), the basic variables are listed.

77
In the second column of the second row, under
the label "CB", the coefficients of the current
basic variables in the objective function are listed.
Thus the coefficients of S1, S2... Sm, which are
included in the initial feasible solution, are written
in the CB column.
The values listed under the non-basic variables
(X1, X2… Xn) in the initial simplex tableau consists
of the coefficients of the decision variables in the
constraint set. They can be interpreted as
physical rates of substitution.
The values listed under the basic variables (S1, S2..
. Sm) in the initial simplex tableau represents the
coefficients of the slack variables in the
constraints set.
78
• In the next column (also called Quantity column),
we write the solution values of the basic
variables.
• To find an entry in the Zj row under a column, we
multiply the entries of that column by the
corresponding entries of ‘CB’ column and add
the results, i.e., Zj= ∑CBiXj. The Zj row entries will
all be equal to zero in the initial simplex tableau.
The other Zj entries represent the decrease in the
value of objective function that would result if
one of the variables not included in the solution
were brought into the solution. The Zj entry
under the “Quantity Column" gives the current
value of the objective function.
79
• The last row labeled "Cj-Zj", called the index row
or net evaluation row, is used to determine
whether or not the current solution is optimal or
not. The calculation of Cj-Zj row simply involves
subtracting each Zj value from the
corresponding Cj value for that column, which is
written at the top of that column. We observe
that Cj -Zj values are meaningful for the non basic
variables only. This is because for a basic
variable, Zj= 1 x Cj = Cj so that Cj-Zj=Cj-Cj= 0.
Note: The entries in the Cj - Zj, row represent the
net contribution to the objective function that
results by introducing one unit of each of the
respective column variables.
80
 A plus value indicates that a greater
contribution can be made by bringing the
variable for that column into the solution.
 A negative value indicates the amount by
which contribution would decrease if one unit
of the variable for that column were brought
into the solution. Index row elements are also
known as the shadow prices (or accounting
prices)

81
Step 5. We test if the current solution is optimum
or not:
If all the elements or entries in the Cj-Zj row (i.e.,
index row) are negative or zero, then the current
solution is optimum.
If there exists some positive number, the current
solution can be further improved by removing one
basic variable from the basis and replacing it by
some non-basic one. So start trying to improve the
current solution in line with the following steps.
Step 6. Further, iterate towards an optimum
solution. To improve the current feasible solution, we
replace one current basic variable (called the
departing variable) by a new non-basic variable
(called the entering variable).
82
• We now determine the variable to enter into the
solution mix, the entering variable. One way of doing
this is by identifying the column with the largest
positive value in the C - Z row of the simplex table.
j j

The column with the largest positive entry in the C - Z

j j

row is called the key or pivot column. The non-basic

variable at the top of the key column is the entering
variable that will replace a basic variable.
• Next, we determine the departing variable to be
replaced in the basis solution. This is accomplished
by dividing each number in the quantity column by the
corresponding number in the key column selected in
identifying the entering variable. We compute the ratio
b1/a1 , b /a ... bm/a . This is called replacement ratio.
j 2 2j mn

Replacement Ratio (RR) = Solution Quantity (Q)

Corresponding values in pivot column
83
• The row with the minimum ratio is the key
row or pivot row. The corresponding
variable in the key row (the departing
variable) will leave the basis.
• We identify the key or pivot element. This
is the number that lies at the intersection
of the key column and key row of a given
simplex tableau.

84
Step 7.Evaluate the new solution by constructing a
second simplex tableau. After identifying the entering
and departing variable, all that remains is to find the
new basic feasible solution by constructing a new
simplex tableau from the current one.
Now we evaluate or update the new solution in the
following way:
• New values for the key row are computed by simply
dividing every element of the key row by the key
element to obtain a unit vector (1) in the key element.
• The new values of the elements in the remaining
rows for the new simplex table can be obtained by
performing elementary row operations on all rows so
that all elements except the key element (1) in the
key column are zero, i.e. unit vector.
85
Formula:
New Row element= Old row element - (Old row
element in pivot column * corresponding
element in replaced row.
• New entries in the CB column and XB
column are entered in the new table of the
current solution.
• Compute the values of the Cj - Zj row. If all
the numbers in Cj - Zj row are either negative
or zero, an optimum solution has been
obtained.

86
Step 8. If any of the numbers in Cj - Zj row are
positive, repeat the steps (6-7) again until an
optimum solution has been obtained.
Note: Rules for Ties. In choosing a key column
and a key row, whenever there is a tie between
two numbers, the following rules may be
followed:
• The column farthest to the left may be
selected if there is a tie between two numbers
in the index row.
• The nearest ratio to the top may be selected
whenever there is a tie between two
replacement ratios in the ratio column.

87
Example (Maximization Case)
Finding the initial Feasible Solution
As discussed above, the initial feasible solution is
found by setting the decision variables to zero.

Max Z = 60X1+50X2+0S1+0S2+0S3
Subject to 4X1+10X2+S1 = 100
2X1+ X2+S2 = 22
3X1+ 3X2+S3 = 39
X1, X2> = 0

88
Initial Simplex tableau
Cj 60 50 0 0 0 Qty

Basic V. X1 X2 S1 S2 S3

S1 0 4 10 1 0 0 100

S2 0 2 1 0 1 0 22

S3 0 3 3 0 0 1 39

Zj 0 0 0 0 0 0

Cj-Zj 60 50 0 0 0
89
Interpretation of the Initial Feasible Solution
• To be noted first is that the values of each basic
variable (variables that are in solution) is
composed of a single 1 and the rest 0’s. This is
called a unit vector. Basic variables will have a
unit vector. Moreover, ‘1’ will appear in the same
row that the variable appears in. The unit vector
concept will help us in developing subsequent
tableaus when we want to change the list of
variables that are in solution.
• The Zj row in the quantity column indicates that
the value of the objective function is 0.
• The values in the Cj-Zj row indicate the net
contribution of the variables if one unit of each
variable is added into that solution. 90
• For example, the 60 in column X indicates that
1

bringing one unit of X would increase the value of

1

the objective function by $60. The same is true for

the X column, i.e. bringing one unit of X would
2 2

increase the value of the objective function by $50.

• On the other hand, since the slack variables are at
their maximum, their values in the C -Z row are all 0.
j j

According to what has been said before, we have

the following rule in order to identify an optimal
solution.
• A simplex solution in a maximization problem is
optimal if the C -Z row consists of entirely zeros and
j j

negative numbers, i.e. there are no positive values in

the row.
• So for our case in the initial tableau, we have two
positive values under the non-basic variables, which
indicate that further improvement of the solution is
possible. As a result, we go for the optimal solution
by developing the second simplex tableau. 91
Developing the Second Simplex Tableau
• Since further improvement is possible, one of the
decision variables will be brought into the solution and
one of the current basic variables will be leaving the
solution. ‘Which non-basic variable should be brought
into the solution and which basic variable should leave
the solution?’ is a major concern here.
• In answering the first question, the non-basic variable
that should enter the solution should be the one with the
highest positive value in the C -Z row since bringing that
j j

non-basic variable into the solution would make the

highest contribution to the solution (objective function)
and result in the largest profit potential.
• As a result, the variable with the highest value in the C -Z
j j

row of the initial simplex tableau is the X column with a

1

value 60.
92
Therefore, X should enter the basis or the solution
1

mix. The X column is now called the pivot column.

1

The numbers in this column (4, 2, 3) indicate the

amount of the basic variables needed to get one unit
of X . For example, the number 4 indicates that 4
1

units of the first slack are needed to obtain one unit

of X .
1

Since X has the highest profit potential, we need to

1

make as much X units as possible. The amount of X

1 1

that can be made depends on the values in the pivot

column and the amount of slack available shown
under the quantity column.
By dividing the values in the pivot column by their
respective values in the quantity column, we can
identify the variable that is most limiting.
The values obtained by dividing will help us in
determining the variable that should leave the
solution. 93
Cj 60 50 0 0 0
Basic V. X1 X2 S1 S2 S3 Quantity

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

Zj 0 0 0 0 0 0

Cj-Zj 60 50 Pivot
0 Element
0 0
Pivot Row
Pivot Column 94
 Among the constraints, the one with the smallest
non-negative ratio is the most restrictive since it
determines the amount of X1. In this particular case,
there is only enough of the second constraint to
make 11 units of X1.
 In making the 11 units of X1, the second resource
(S2) will be down to zero indicating that S2 will leave
out the solution mix. The row of the leaving variable
is called the pivot row.
 The intersection of the pivot row and the pivot
column is called the pivot element.
 As a rule, The leaving variable is the one with the
smallest non-negative ratio.
95
If a zero is obtained in the results of division,
none of the corresponding variable is needed to
obtain one unit of the entering variable.
If a negative value is obtained in the division,
bringing the entering variable into the solution
would increase the amount of the basic variable.
These values will not limit the amount of the
entering variable. Therefore, there is no need to
divide the quantity column by zero or negative.
Since we have determined the leaving and the
entering variables and since the initial feasible
solution can be improved further, we need to
develop the second tableau in order to find the
optimal solution.

96
 In developing the second tableau, we should compute for
revised values of the constraint equations,
the Z row and the C-Z row and
remember that the variables in solution will have a unit vector,
with a value of 1 in the intersection of the column and the row
of the basis, i.e. the pivot element.
To obtain a unit vector in the basis column, we perform
elementary row operations resulting in new row values by
either multiplying/dividing all the elements in a row by a
constant or adding/subtracting the multiple of a row to or
from another row.
In computing for the new row values from our initial simplex
tableau, we first multiply the second
constraint by ½ obtaining the
values as follows:
1X+1/2X+0S+1/2S+0S = 11,
which results in making the pivot element 1.
97
• Next, we multiply the above new row values
by 4 and subtract it from the first constraint
obtaining the following results: i.e.
(NR1=OR1- 4NR2)
0X1+8X2+1S1+ -2S2+0S3 = 56.
• Then, we multiply the new row values in the
pivot row by 3 and subtract it from the third
constraint resulting as follows:
0X1+3/2X2+0S1-3/2S2+1S3 = 6.
Having these new row values, we develop the
second simplex tableau as shown below.
98
Second Simplex Tableau
Cj 60 50 0 0 0 Quantity
Basic V. X1 X2 S1 S2 S3

S1 0 0 8 1 -2 0 56

X1 60 1 1/2 0 1/2 0 11

S3 0 0 3/2 0 -3/2 1 6

Zj 60 30 0 30 0 660

Cj-Zj 0 20 0 -30 0
99
Interpretation of the Second Simplex Tableau
• The profit obtained at this point of solution is
$660. In the Cj-Zj row, we search for the
highest positive value.
• Therefore, we have a positive value in the Cj-
Zj row which indicates that this is not the
optimal solution. As a result, we go for the
next tableau.

100
Developing the Third Tableau
 we select the entering and the leaving variables.
 The entering variable is the one with the highest
Cj-Zj row value which is the X2 column. This
means that bringing one unit of X2 into the
solution increases profit by $20.
 Therefore, the X2 will be the entering variable
designated as the pivot column.
 To determine the leaving variable, we divide the
values in the pivot column by their
corresponding row values in the quantity column.
The result obtained, as shown in the table below
indicates that S3 is the leaving variable with the
smallest non-negative ratio. This means that S3
is the most limiting resource for how much units
of X2 can be made. 101
Cj 60 50 0 0 0 Qty
X1 X2 S1 S2 S3
Basic V.

S1 0 0 8 1 -2 0 56 56/8 = 7

X2 6 1 1/2 0 ½ 0 11 11/
(1/2)=22
0
6/(3/2) = 4
S3 0 0 3/2 0 -3/2 1 6

Zj 60 30 0 30 0 660

Cj-Zj 0 20 0 -30 Pivot

0 Element
Pivot Row Pivot Column 102
• After identifying the entering and the leaving
variables, we perform elementary row operations.
• To obtain a unit vector with 1 in the pivot
element, we multiply the pivot row by 2/3
resulting as follows:
0X1+1X2+0S1+-1S2+2/3S3 = 4
• Then, multiply the above new row values by 8
and subtract it from the first constraint (row)
resulting as follows:
0X1+0X2+1S1+6S2+-16/3S3 = 24.
• For row 2, first multiply the new row values in the
pivot row by ½ and subtract it from the second
row resulting as follows:
1X1+0X2+0S1+1S2+-1/3S3 = 9.
103
Cj 60 50 0 0 0

Basic V. X1 X2 S1 S2 S3 Qty

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

104
Interpreting the Third Tableau
• All the values in the Cj-Zj row are zero and
negative indicating that there cannot be
additional improvement. This makes the third
tableau to contain the optimal solution with the
following basic variables
S1 = 24, X1 = 9, and X2 = 4 producing a
maximum profit of $740.
• This means that in order to achieve the
maximum profit, the company should produce
9 units of X1 and 4 units of X2 leaving 24 hours
of unused resource of the first constraint.

105
SIMPLEX MAXIMIZATION WITH MIXED
CONSTRAINTS
(= AND >= CONSTRAINTS)
The Big M Method—introducing slack, surplus
and artificial variables
• If any problem constraint has negative
constants on the right side, multiply both sides
by -1 to obtain a constraint with a non-negative
constant. (If the constraint is an inequality, this
will reverse the direction of the inequality.)
• Introduce a slack variable in each <=
constraints.
• Introduce a surplus variable and an artificial
variable in each >= constraint.

106
• Introduce an artificial variable in each
'='constraint.
• For each artificial variable Ai, add -MAi to the
objective function in case of maximization
and
+MAi in case of minimization.
• Use the same constant M for all artificial
variables.
• Form the simplex tableau for the modified
problem.
• Solve the modified problem using the
simplex method. 107
• Relate the solution of the modified problem
to the original problem:
– If the modified problem has no solution, then the
original problem has no solution.
– If any artificial variables are non-zero in the
solution to the modified problem, then the
original problem has no solution.
Note. The artificial variables are introduced for
the limited purpose of obtaining an initial solution
and are required for the constraints of >= type or
the constraints with '=' sign. It is not relevant
whether the objective function is of the
minimization or the maximization type.
108
• since artificial variables do not represent any
quantity relating to the decision problem, they must
be driven out of the system and must not remain in
the final solution (and if at all they do, it represents a
situation of infeasibility. This can be ensured by
assigning an extremely high cost to them.
• Generally, a value M is assigned to each artificial
variable, where M represents a number higher than
any finite number.
• For this reason, the method of solving the problems
where artificial variables are involved is termed as
the 'Big M Method'.
• When the problem is of the minimization nature, we
assign in the objective function a coefficient of +M
to each of the artificial variables.
• On the other hand, for the problems with the
objective function of maximization type, each of the
artificial variables introduced has a coefficient -M.109
• In case of equality constraints( a sign ‘=‘ ), a slack variable
is not acceptable since these constraints require a precise
amount. To overcome this problem, artificial variables are
introduced which are added to = and >= constraints.
• They have no physical representation for their purpose to
allow the use of simplex process.
• As a result, they should not appear in the final optimal
solution.
• Assignment of coefficients for artificial variables depends
on the type of the problem, whether it is a maximization or
a minimization problem.
• In case of maximization problem, a large negative
contribution or coefficient in the objective function would
ensure the removal of artificial variables from the optimal
solution, commonly represented by -M. For minimization
problems, introducing a large positive coefficient would
ensure the non-existent of artificial variables in the optimal
solution, commonly represented by M.

110
• In addition to this, a slack is not allowed in >=
constraints since they can only happen an
excess amount that is more than the minimum
amount of a constraint. This excess amount is
represented by a surplus variable and is
subtracted from the constraint.
Example–Maximization Problems with Mixed
Constraints
Assume the following maximization problem with
mixed constraints.
Max. Z = 6X1+8X2
Subject to X2 <= 4
X1+X2 = 9
6X1+2X2>= 24
111
• In solving for this problem, introducing a slack
variable is not acceptable since they represent
unused capacity and there is no unused capacity
in = , and >= constraints.
• Therefore, for >= constraints we introduce a
surplus variable, and for both >= and =
constraints we introduce artificial variables
resulting as follows.
Max Z = 6X1+8X2+0S1+0S3-MA2-MA3
Subject to X2 + S1 = 4
X1+X2+A2 = 9
6X1+2X2-S3+A3 = 24
X1 , X2 > = 0
112
Developing the Initial Simplex Tableau
 In the initial tableau, we list the variable in
the order of decision variable, slack/surplus
variables and finally artificial variables. And
for constraints, use artificial variables, and/
or slack variables and/or surplus variables
for the initial solution.
 Therefore, the initial tableau for the problem
is represented as follows.

113
 Cj 6 8 0 0 -M -M Qty
X1 X2 S1 S3 A2 A3
Basic V.
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

Zj -7M -3M 0 +M -M -M -33M

Cj-Zj 6+7M 8+3M 0 -M 0 0

114
• Since this is a maximization problem, the
entering variable is the one with the maximum
Cj-Zj value.
• Therefore, the variable with the maximum Cj-Zj is
X1, the decision variable. And the leaving
variable is with the minimum non-negative ratio
which is A3, the artificial variable.
• Since this artificial variable is not needed we
remove it from the next tableau.
Developing the Second Simplex Tableau
• After identifying the entering and the leaving
variable, the usual elementary row operations
are performed to obtain a unit vector in the
entering variable column. The end result after
performing the row operations is as follows
which shows the second tableau. 115
Second Simplex Tableau
Cj 6 8 0 0 -M Qty
X1 X2 S1 S3 A2
Basic V.
S1 0 0 1 1 0 0 4

A2 -M 0 2/3 0 1/6 1 5

X1 6 1 1/3 0 -1/6 0 4

Zj 6 2-2/3M 0 -1-M/6 -M 24-5M

Cj-Zj 0 6+2/3M 0 1+M/6 0

116
Developing the Third Simplex Tableau
• Selecting the entering and leaving variables, we go
for obtaining a unit vector in the pivot column by
using the elementary row operations. We get the
following third tableau.

117
Third Simplex Tableau

118
• Similarly, we identify the entering and the
leaving variables which are S3 and A2
respectively representing the maximum Cj-Zj
value and the minimum ratio.
Developing the Fourth Simplex Tableau
 Perform elementary row operations as usual
to have a unit vector in the entering variable
column and you will get the following fourth
tableau.

119
 Fourth Simplex Tableau

Cj 6 8 0 0 Qty

Basic V. X1 X2 S1 S3

X2 8 0 1 1 0 4

S3 0 0 0 -4 1 14

X1 6 1 0 -1 0 5

Zj 6 8 2 0 62

Cj-Zj 0 0 -2 0
120
• This tableau represents the final tableau
since we have only zeros and negative
values in the Cj-Zj row which indicates that it
is the optimal solution. So we have the
following results for each of the variables
and the profit obtained.
X1 = 5, X2 = 4, S3 = 14, and Profit = 62

121
2.3.2.2. MINIMIZATION LINEAR PROGRAMMING
PROBLEMS
Big M-method /Charnes Penalty Method/
• The Big-M Method is a technique, which is used
in removing artificial variables from the basis .
• In this method; we assign coefficients to
artificial variables, undesirable from the
objective function point of view. If objective
function Z is to be minimized, then a very large
positive price (called penalty) is assigned to
each artificial variable. Similarly, if Z is to be
maximized, then a very large negative cost (also
called penalty) is assigned to each of these
artificial variables.
122
The characteristics of Big-M Method:
a. High penalty cost (or profit) is assumed as M
b. M as a coefficient is assigned to artificial
variable A in the objective function Z.
c. Big-M method can be applied to minimization
as well as maximization problems with the
following distinctions:
i. Minimization problems
-Assign +M as coefficient of artificial variable A
in the objective function Z of the minimization
problem.

123
 ii. Maximization problems:
-Here –M is assigned as coefficient of artificial
variable A in the objective function Z of the
maximization problem.
d) Coefficient of S (slack/surplus) takes zero
values in the objective function Z.
e) For minimization problem, the incoming
variable corresponds to the highest negative
value of Cj-Zj.
f) The solution is optimal when there is no
negative value of Cj-Zj.(For minimization LPP case)

124
• The various steps involved in using simplex
method for minimization problems are:
Step 1. Formulate the linear programming
model, and express the mathematical model
of L.P. problem in the standard form by
introducing surplus and artificial variables in
the left hand side of the constraints. Assign a
0 (zero) and +M as coefficient for surplus and
artificial variables respectively in the
objective function. M is considered a very
large number so as to finally drive out the
artificial variables out of basic solution.
125
Step 2. Next, an initial solution is set up. Just to
initiate the solution procedure, the initial basic
feasible solution is obtained by assigning zero
value to decision variables. This solution is now
summarized in the initial simplex table. Complete
the initial simplex table by adding two final rows Z,
and Cj - Zj. These two rows help us to know
whether the current solution is optimum or not.
Step 3. Now; we test for optimality of the solution.
If all the entries of Cj-Zj, row are zeros and positive,
then the solution is optimum. However, this
situation may come after a number of iterations.
But if at least one of the Cj - Zj values is less than
zero, the current solution can be further improved
by removing one basic variable from the basis and
replacing it by some non-basic one.
126
Step 4. (i) Determine the variable to enter the basic
solution. To do this, we identify the column with the
largest negative value in the C - Z row of the table.
j j

(ii) Next we determine the departing variable from

the basic solution. If an artificial variable goes out
of solution, then we discard it totally and even this
variable may not form part of further iterations.
Same procedure, as in maximization case, is
employed to determine the departing variable.
Step 5. We update the new solution now. We
evaluate the entries for next simplex table in exactly
the same manner as was discussed earlier in the
maximization case.
Step 6. Step (3—5) are repeated until an optimum
solution is obtained.

127
So the following are the essential things to observe in
solving for minimization problems:
Note: The entering variable is the one with the largest
negative value in the C -Z row while the leaving
j j

variable is the one with the smallest non-negative

ratio. The optimal solution is obtained when the C -Z j j

row contains entirely zeros and positive values.

Example: Assume the following minimization
problem.
Min Z = 7X +9X
1 2

Subject to : 3X +6X >= 36

1 2

8X +4X > = 64
1 2

X, X > = 01 2

• We introduce both surplus and artificial variables

into both constraints as follows.
128
 Min Z = 7X1+9X2+0S1+0S2+MA1+MA2
Subject to 3X1+6X2 –S1+A1 = 36
8X1+4X2-S2+A2 = 64
X1, X2> = 0
• So the subsequent tableaus for this problem
are shown below.
• To remind in these tableaus is in
transforming from one tableau to another, we
perform elementary row operations to obtain
the unit vector in the pivot column for the
entering variable into the solution.

129
Initial Simplex Tableau
Cj 7 9 0 0 M M Qty

Basic V. X X2 S1 S2 A1 A2
1

A1 M 3 6 -1 0 1 0 36

A2 M 8 4 0 -1 0 1 64

Zj 11M 10M -M -M M M 100M

Cj-Zj 7-11M 9-10M M M 0 0

130
 Second Simplex Tableau

Cj 7 9 0 0 M Qty
X1 X2 S1 S2 A1
Basic V.
A1 M 0 9/2 -1 3/8 1 12

X1 7 1 ½ 0 -1/8 0 8

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

M
Cj-Zj 0 11/2-9/2M M 7/8-3/8M 0

131
Third Simplex Tableau
Cj 7 9 0 0 Quant
Basic V. ity
X1 X2 S1 S2

X2 9 0 1 -2/9 1/12 8/3

X1 7 1 0 1/9 -1/6 20/3

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

Cj-Zj 0 0 11/9 5/12

132
• The third tableau represents a final tableau
since it is the optimal solution with entirely
zeros and positive values in the Cj-Zj row.
• Therefore, the optimal solution is: X1 = 20/3
and X2 = 8/3 and value of objective function
is
Z= 212/3.

133
 Coefficient of extra Presence of
Types of
Extra variables to be variables variables in
constrain added in the objective the initial
t function solution mix
Max Z Min Z
< Add only slack 0 0 Yes
variable

Subtract surplus 0 0 No
variable
> Add artificial variable -M +M Yes

= Add artificial variable -M -M Yes

134
 2.4. SPECIAL ISSUES
• Several special situations which one many
encounter during the application of simplex
method are summarized below:
1. Non-feasible Solution/ Infeasibility
• Infeasibility comes about when there is no
solution that satisfies all of the problem’s
constraints.
• In the simplex method, an infeasible solution
is indicated by looking at the final tableau
Whenever the optimality criteria is satisfied
but still there exist an artificial variable in the
basis or solution mix, this is the indication of
infeasibility.
135
Example:
Minimization case

Cj 5 8 0 0 M

BV X1 X2 S1 S2 A2 Q

5 X1 1 1 -2 3 0 200

8 X2 0 1 1 2 0 100

M A2 0 0 0 -1 1 20
5 8 -2 31-M 1,
Zj
M 800+200M
C j - Zj 0 0 2 M-31 0

Even though all Cj - Zj are positive or 0(i.e. the criterion for an optimal solution in
a minimization case), no feasible solution is possible because an artificial
variable (A2) remains in the solution mix.

136
2. Unbounded Solution
• The procedure in unbounded solution is to
divide each quantity column number by the
corresponding pivot column number. The
row with the smallest positive ratio is
replaced. But if the entire ratios turn out to
be negative or undefined, it indicates that
the problem is unbounded.
• A negative ratio means that increasing that
variable would increase resources.
• A zero ratio means that increasing the
variable would not use any resources.

137
.

Example:
Maximization case:
Cj
6 9 0 0

X1 X2 S1
SV Q
S2
RR
9 X2 -1 1 2 0 30 30/-1=-30
Unacceptable RRs
S2 10/-2=-5
0 -2 0 -1 1 10
Zj -9 9 18 0 270

C j - Zj 15 0 -18 0

Pivot Column

138
• The solution in the above case is not optimal because
not all Cj - Zj entries are 0 or negative, as required in a
maximization problem.
• The next variable to enter the solution should be X1.To
determine which variable will leave the solution, we
examine the ratios of the quantity column numbers to
their corresponding numbers in the X1 or pivot column.
Since both pivot column numbers are negative, an
unbounded solution is indicated.
• Note: When unbounded solutions occur, no outgoing
variable will exist.

139
3. Degeneracy
• /Tie for leaving basic variable (key row)/
• If there is a tie for the smallest ratio, this is a
signal that degeneracy exists. Degeneracy can
occur right in the first (initial tableau).
• This normally happens when the number of
constraints is less than the number of variables
in the LP model. Such problems can be
overcome by trial and error method.
• If this is resolved by a proper selection of the key
element, degeneracy can be avoided.
• The main drawback to degeneracy is the
increase in the computation, which reduces the
efficiency of the simplex method considerably.
140
 Example

Cj
5 8 2 0 0 0

X1 X2 X3 S1 S2
SV
S3 Q
RR

1/4 1 1 -2 0
8 X2 10 10/1/4=40
0
Tie for the smallest ra
4 0 1/3 -1 1 20/4=5 Indicates degeneracy
0 S2 20
0
2 0 2 2/5 0
0 S3 10
1 10/2=5
2 8 8 16 0
Zj 80
0
Cj - Zj 3 0 -6 -16 0 0

141
• Two incoming variables
/ Or Tie for entering variables/

• In order to break this tie, the selection for the key column
(entering variable) can be made arbitrary. However; the
number of solution can be minimized by adopting the
following rules:
1. If there is a tie between two decision variables, then the
selection can be made arbitrary.
2. If there is a tie between a decision variable and a slack
(or surplus) variable, then select the decision variable to
enter into basis first.
3. If there is a tie between slack or surplus variable, then
selection can be made arbitrary.
Example:
If the equation is max Z:
142
Example:
If the equation is max Z:

In such a case,X1 is the entering variable

Cj
X1 X2 S1
SV Q
S3

Zj
Cj - 5 2 5
0
Zj 143
END OF PART ONE

144
 PART TWO: Post optimality Analysis
2.1. DUALITY
• The term ‘dual’ in a general sense implies two
or double.
• Every linear programming problem can have
two forms:
The original formulation of a problem is referred
to as its Primal form.
The other form is referred to as its dual form. In
general, however, it is immaterial which of the
two problems called primal or dual, since the
dual of the dual is primal.

145
• The dual involves setting up and solving a LP problem
that is almost a ‘mirror image’ of a LP problem that has
been formulated.
• Both in its formulation and solution, the dual is the flip
flop version of the primal.
• In the context of LP, duality implies that each LP problem
can be analyzed in two different ways, but having
equivalent solution.
• For example, consider the problem of production planning.
• By using the primal LP problem, the production manager
attempts to optimize resource allocation by determining
quantities for each product to be produced that will
maximize profit. But through dual LP problem approach,
he attempts to achieve production plan that optimizes
resource allocation so that each product is produced at
that quantity such that its marginal opportunity cost
equals its marginal return

146
 Thus, the main focus of dual is to find for each resource
its best marginal value or shadow price.
 This value reflects the scarcity of resources, i.e., the
maximum additional prices to be paid to obtain one
additional unit of the resources to maximize profit under
the resource constraints.
 If resource is not completely used, i.e., there is slack, then
its marginal value is zero.
• The shadow price is also defined as the rate of change in
the optimal objective function value with respect to the
unit change in the availability of a resource. Precisely for
any constraint, we have,

Shadow Price = change in the optimal objective function

value
unit change in the availability of a
resource
147
 Analysis of the dual can also enable a manager
to evaluate the potential impact of a new
product, and it can be used to determine the
marginal values of resources (i.e. constraints).
 Relative to a product, a manager would want to
know what impact adding a new product would
have on the solution quantities and the profit;
relative to resources, a manager can refer to a
dual solution to determine how much profit one
unit of each resource equivalent to; Whereas
the primal gives solution results in terms of the
amount of profit gained from producing
products, the dual provides information on the
value of the constrained resources in achieving
that profit.
148
 2.1.1. Formulating the Dual
Suppose the primal LP problem is given in the form:-
Maximize Zx = c x + c x + ... +c x 1 1 2 2 n n

Subject to
a x +a x +... + a x ≤ b
11 1 12 2 1n n 1

a x +a x +... + a x ≤ b
21 1 22 2 2n n 2

a x +a x +... + a x ≤ b
m1 1 m2 2 mn n m

x ,x ... x ≥ 0 1 2 n

and then the corresponding dual LP problem is defined as:

Minimize Zy = by+ by + ... +b y 1 1 2 2 m m

Subject to
a y+a y+... + a y ≥ c
11 1 21 2 m1 m 1

a y+a y+... + a y ≥ c
12 1 22 2 m2 m 2

a y+a y+... + a y c
1n 1 n2 2 mn m n

y,y... Y ≥ 0
1 2 m

149
150
• The following rules which guide the formulation
of the dual problem will give you the summary
of the general relationship between primal and
dual LP problems.
1. If the primal’ objective is to minimize, the dual’s
will be to maximize; and the vice versa.
2. The coefficient’s of the primal’s objective
function become the RHS values for the dual’s
constraints.
3. The primal’s RHS values become the
coefficients of the dual’s objective function.
4. The coefficients of the first “row” of the
primal’s constraints become the coefficients of
the first “column” of the dual’s constraint …..
5. The ≤ constraints become ≥ and the vice versa.
151
 Consider this Primal problem:
M inimize 40x + 44x + 48x
1 2 3

Subject to: 1x + 2x + 3x > 20

1 2 3

4x + 4x + 4x > 30
1 2 3

x,x,x>0
1 2 3

The dual of this problem is:

M ax i m i se Z = 20y + 30 y
1 2

S ubj ect to:

1y + 4 y < 40
1 2

2y + 4 y < 44
1 2

3y + 4 y < 48
1 2

y , y > 0
1 2
152
T he follow ing table show s how the primal problem is transformed into its dual.

153
• We can see from the table that the original objective
was to minimize, whereas the objective of the dual is
to maximize. In addition, the coefficients of the
primal’s objective function become the right-hand side
values for the dual’s constraints, whereas the primal’s
right-hand side values become the coefficients of the
dual’s objective function.
• Note that the primal has three decision variables and
two constraints; whereas the dual has two decision
variables and three constraints.
• The constraint coefficients of the primal are constraint
coefficients of the dual, except that the coefficients of
the first “row” of the primal become the coefficients of
the first “column” of the dual, and the coefficients of
the second “row” of the primal become the
coefficients of the second “column” of the dual.
• When the primal problem is a maximization problem
with all < constraints, the dual is a minimization
problem with all > constraints.
154
2.1.2. Formulating the Dual when the Primal has Mixed
Constraints
• In order to transform a primal problem into its dual, it is
easier if all constraints in a maximization problem are of the
< variety, and in a minimization problem, every constraint is
of the > variety.
• To change the direction of a constraint, multiply both sides
of the constraints by -1.
For example,
-1(2x + 3x > 18) is -2x -3x < -18
1 2 1 2

• If a constraint is an equality, it must be replaced with two

constraints, one with a < sign and the other with a > sign.
For instance,
4x + 5x = 20
1 2

will be replaced by
4x + 5x < 20
1 2

4x + 5x > 20
1 2

Then, one of these must be multiplied by -1, depending on

whether the primal is maximization or a minimization problem.
155
EXAMPLE:
Formulate the dual of this LP model.
Maximize Z = 50x1 + 80x2
Subject to:
C1 3x1 + 5x2 ≤ 45
C2 4x1 + 2x2 ≥16
C3 6x1 +6x2 = 30
x ,x ≥ 0

156
SOLUTION
• Since the problem is a max problem, put all the
constraints into the ≤ form. Subsequently, C2
and C3 will be first adjusted into ≤ constraints.
C2 will be multiplied by -1:
-1(4x1 + 2x2 ≥16) becomes -4x1 - 2x2 ≤ -16
 C3 is equality, and must be restated as two
separate constraints. Thus, it becomes:
6x1 +6x2 ≤ 30 and 6x1 +6x2 ≥30.
Then the second of these must be multiplied by -1.
-1(6x +6x ≥30) becomes -6x -6x ≤ -30
After making the above adjustments, rewrite the
LP model again.
157
Maximize Z = 50x1 + 80x2
Subject to:
C1 3x1 + 5x2 ≤ 45
C2 -4x1 - 2x2 ≤ -16
C3 6x1 +6x2 ≤ 30
C4 -6x1- 6x2 ≤ -30
x1 , x 2 ≥ 0

158
The dual of the above problem will be:
Minimize 45y1 - 16y2 + 30y3 – 30y4
Subject to
C1 3y1 -4y2 + 6y3 – 6y4
≥ 50
C 2 5y1 - 2y2 + 6y3 – 6y4
≥ 80
y1, y2, y3, y4 ≥ 0

159
2.1.3. Comparison of the Primal and Dual Simplex Solutions
Cross -referencing the values in the primal and dual final
simplex tableaus is shown as follows.

PRIMAL HOW LEBELED/ WHERE CORRESPONDENCE IN

FOUND IN THE PRIMAL THE DUAL
-Decision x1, x1, x1 . . . s1,s2,s3,…….
variable
- slack variable s1,s2,s3,……. y1, y2, y3…

- shadow prices Z row under slack Quantity column in

column decision variable rows.

-solution Quantity column C-Z row under slack

quantities and
decision variable
columns 160
Example:
• To show that the flip-flopping of values
between the primal and the dual carries over
to their final simplex tableaus.
• The first table contains the final tableau for
the dual and the second one contains the
final tableau for the primal.

161
Final tableaufoDual solution to the Microcomputer problem
C 100 22 39 0 0 M M Quantity
Basis y1 y2 y3 s1 s2 a1 a2
y3 39 16/3 0 1 1/3 -2/3 -1/3 2/3 40/3 Primal
y2 22 -6 1 0 -1 1 1 -1 10 shadow
Z 76 22 39 -9 -4 9 4 740 prices
C-Z 24 0 0 9 4 9-M 4-M

Primal solution quantities

162
• The primary concern with a simplex solution
is often three fold:
– Which variables are in solution?
– How much of each variable is in the optimal
solution?
– What are the shadow prices for the constraints?

163
Let’s consider how we can obtain the answers to
these questions from the dual solution.
• Notice that the solution quantities of the dual
are equal to the shadow prices of the primal (i.e.
40/3 and 10).
• Next, notice that the values of the solution
quantities of the primal (i.e., 24, 9, and 4) can be
found in the bottom row of the dual.
• Now, in the primal solution, s1 equals 24. In the
dual, the 24 appears in the y1 column.
• The implication is that a slack variable in the
primal solution becomes a real variable (i.e., a
decision variable) in the dual. The reverse is
also true: A real variable in the primal solution
becomes a slack variable in the dual.
164
• Therefore, in the primal solution we have x = 9
1

and x = 4; in the dual, 9 appears under s in the

2 1

bottom row, and 4 appears under s 2.

• Thus, we can read the solution to the primal

problem from the bottom row of the dual: In the
first three columns of the dual, which equate to
slack variables of the primal, we can see that
the fist slack equals 24 and the other two are
zero.
• Under the dual’s slack columns, we can read the
primal values of the decision variables.
• In essence, then, the variables of the primal
problem become the constraints of the dual
problem, and vice versa.
165
2.1.4. Economic Interpretation of the Dual
Suppose the microcomputer firm has been
approached by a representative of a department
store chain that wants the firm to make computers
that will be sold under the store’s brand name.
The microcomputer company has only a limited
capacity for producing computers, and therefore,
must, decide whether to produce its own
computers or produce computers for the
department store.
•For convenience, the original problem is
repeated here:
x = number of Model I
x = number of Model II’s
166
• Maximize 60x1 + 50x2
Subject to: Assembly time: 4x1 + 10x2< 100
Inspection time: 2x1 + 1x2 < 22
Storage space: 3x1 + 3x2< 39
x1, x2>= 0

167
The manager of the firm would reason in the following way:
For each unit of Model I that the firm sacrifices to
produce computers for the department store, it will gain
4 hours of assembly time, 2 hours of inspection time,
and 3 cubic feet of storage space, which can be applied
to the store computers. However, it will also give up a
unit profit of $60.
Therefore, in order for the firm to realistically consider
the store’s offer, the amounts of scarce resources that
will be given up must produce a return to the firm that is
at least equal to the foregone profit.
Hence, the value of 4 assembly hours, + 2 inspection
hours, + 3 cubic feet of storage space > $60.
By similar reasoning, giving up one unit of Model II will
require that the value received by giving up 10 assembly
hours, + 1 inspection hour, + 3 cubic feet of storage
must equal or exceed the Model II profit of $50 per unit.
These, then, become the constraints of the dual
problem. Thus,
168
V alue R eceived R esources M inimum Profit
Per U nit of Freed U p R equired
M odel I 4y + 2y + 3y $60
1 2 3

M odel II 10y + 1y + 3y $50

1 2 3

• Hence the constraints of the dual refer to the

value of capacity (i.e., the scarce resources).
• The formulation indicates that in order to switch
from making units of Models I and II to making
computers for the department store, the value
received from that switch must be at least equal
to the profit foregone on the microcomputer
models. 169
• The variables y1, y2 and y3 are the marginal
values of scarce resources (assembly time,
inspection time, and storage space). Solving
the dual will tell us the imputed values of the
resources given our optimal solution.
• Naturally, the department store would want to
minimize the use of the scarce resources,
because the computer firm almost certainly
would base its charges on the amount of
resources required.
• Consequently, the objective function for the
dual problem focuses on minimizing the use of
the scarce resources. Thus:
Minimize: 100y1 + 22y2 + 39y3
170
• Looking at the optimal solution to the dual of the
microcomputer problem, we can see the marginal
values of y and y in the Quantity column, but not
2 3

the value of y . This is because the optimal

1

solution to the primal did not completely use up all

of the assembly capacity.
• Consequently, no amount of either x or x would
1 2

need to be given up to obtain one free hour of

assembly time. Thus, the marginal value of one
hour of assembly time is $0.
• Finally, the optimal dual solution always yields the
same value of the objective function as the primal
optimal. In this case, it is 740.
• The interpretation is that the imputed value of the
resources that are required for the optimal
solution equals the amount of profit that the
optimal solution would produce.
171
2.1.5. Adding another Variable
• The concepts introduced in the preceding section
also can be applied to evaluating the feasibility of
adding another decision variable to the problem.
• For example, suppose the microcomputer firm is
considering a third model of microcomputer that will
yield a profit of Birr 70 per unit, and this will need
resource requirements of 8 hours of assembly time,
4 hours of inspection time, and 5 cubic feet of
storage space per unit.
• The dual constraint for this model would be:
8y1 + 4y2 + 5y3> 70

172
 • In order to determine if this new variable would come into
the optimal (primal) solution, we can substitute the dual
solution of y = 0, y = 10, and y = 40/3 (i.e., the shadow
1 2 3

prices, or marginal values of the resources) into this

constraint to see if it would be satisfied.
• Thus, we find, 8(0) + 4(10) + 5(40/3) = 106.67. Because
this amount is greater than the new dual constraint, the
original solution remains optimal.
• Hence, the new variable (x ) would not come into solution.
3

Conversely, if the dual constraint has not been satisfied,

the new variable would have come into solution.
• In this instance, the marginal value of scarce resources
that would be required for the new model exceeds the
marginal contribution to profit that the new model would
provide. That is, Birr106.67 > Birr70.
Note: The value of this approach is that it is not necessary
to rework the entire problem in order to test the potential
impact that adding a new decision variable would have on
the optimal solution.
173
2.1.6. Managerial Significance of Duality
• The importance of the dual LP problem in terms of the
information which it provides about the value of the
resources. The economic analysis is concerned with
deciding whether or not to secure more resource and how
much to pay for these additional resources. The
significance of the study dual is as follows;
– The dual variables provide the decision maker a basis
for deciding how much to pay for additional unit of
resources.
– The maximum amount that should be paid for one
additional unit of a resource is called its shadow price
(also called simplex multiplier).
– The total marginal value of the resources equals the
optimal objective function value. The dual variables
equal the marginal value of resources (shadow prices).
174
Note: The value of i dual variable is the rate at which the
th

primal objective function value will increase as the i

th

resource increases, assuming that all other data is

unchanged.
3.1.7. Advantages of Duality
• It is advantageous to solve the dual of a primal having
less number of constraints, because the number of
constraints usually equals the number of iterations
required to solve the problem.
• It avoids the necessity of adding surplus or artificial
variables and solve the problem quickly.
• The dual variables provide an important economic
interpretation of the final solution of an LP problem.
• It is quite useful when investigating change in the
parameters of a LP problem ( called Sensitivity analysis)
.
175
2.2. Sensitivity Analysis
 It is the study of sensitivity of the optimal
solution of an LP problem due to discrete
variations (changes) in its parameters.
 The degree of sensitivity of the solution due to
these changes can range from no change to all
to a substantial change in the optimal solution of
the given LP problem.
 It carries the LP analysis beyond the
determination of the optimal solution and begins
with the final simplex tableau.
 Its purpose is to explore how changes in any of
the parameters of a problem, such as the
coefficients of the constraints, coefficients of
the objective function, or the right hand side
values; would affect the solution.
176
 For this, instead of resolving the entire problem
as a new problem with new parameters, we may
consider the original optimal solution as an
initial solution for the purpose of knowing the
ranges, both lower and upper, within which a
parameter may assume a value.
• For instance, a manager may want to consider
obtaining an additional amount of scarce
resource that might be available, in which case
the manager would want to know the answers
to questions such as:
a) Will an increase in the right hand side of this
constraint affect the objective function?
b) If so, how much of the resource can be used?
c) Given the answer to the preceding question, what
will be the revised optimal solution?
177
• Conversely, the decision maker might be facing
a situation in which the amount of scarce
resource available is less than the original
amount, in which case the issues would be:
a- Will the decreased level of the resource have
an impact on the value of the objective function?
b - If yes, how much of an impact will it have,
and what will be the revised optimal solution?
• The process of studying the sensitivity of the
optimal solution of an LP problem is also called
post optimality analysis because it is done after
an optimal solution, assuming a given set of
parameters, has been obtained for the model.

178
• The discussion here covers only two types
of changes:
– changes in the right hand side levels of the
constraints, and
– changes in the coefficients of the objective
function as change in the coefficient of
constraints is beyond the coverage of this
material.
• To demonstrate sensitivity analysis, the
microcomputer example will again be used.

179
180
• The most obvious way to ascertain the effect
of a change in the parameter of the model is
to make the change in the original model,
resolve the model, and compare the solution
result with the original solution.
• However, resolving a problem can be very
time consuming and as it will be
demonstrated below, it is unnecessary.
• In most cases the effect of changes in the
model can be determined directly from the
final simplex tableau.

181
2.2.1. A Change in the RHS of a constraint
• The first step in determining how a change
in the RHS (Right Hand Side) of a constraint
(e.g., the amount of scarce resource that is
available for use) would influence the
optimal solution is to examine the shadow
prices in the final simplex tableau. Shadow
prices are the values in the Z row in the
slack columns.
• The final tableau for the microcomputer is
shown in the following table since sensitivity
analysis starts from final tableau.
182
 60 50 0 0 0
Cj x1 x2 s1 s2 s3 Qty
Basis
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
Z 60 50 0 10 40/3 740
C-Z 0 0 0 -10 -40/3

Negatives of
shadow prices

183
• A shadow price is a marginal value; it indicates the
impact that a one-unit change in the amount of a
constraint would have on the values of the
objective function.
• As we can see from the table, the shadow prices
are $0 for s (Assembly time), $10 for s (Inspection
1 2

time), and $40/3 for s (Storage space).

3

• These tell us that:

 an increase in the amount of assembly time would
have no effect on profit;
if inspection time is increased by one hour, it will
increase the profit by $10, and
if storage space is increased by 1 cubic foot, profit
would increase by $40/3.
• The reverse also holds; If we decrease them by
such respective amounts, the decrease in profit
will take the same figure.
184
• What shadow prices do not tell us is the
extents to which the level of a scarce resource
can be changed and still have the same
impact per unit.
• The ability to use additional amounts of a
resource will disappear at some point because
of the fixed amounts of the other constraints.
• Therefore, we need to determine the range
over which we can change the right hand side
quantities and still have the same shadow
price.
• This is called the range of feasibility, or the
right hand side range.
185
• The key to computing the range of feasibility
for the constraint lies in each slack column
of the final simplex tableau.
 To compute the range for each constraint,
the entries in the associated slack column
must be divided into the values in the
Quantity column.
 For example, for the storage column values,
the resulting ratios are:

186
 Here, the smallest positive ratio indicates
how much the constraint level can be
decreased before it reaches the lower limit
of its range of feasibility, and the smallest
negative ratio (i.e. the negative ratio closest
to 0) indicates how much the storage
constraint can be increased before it
reaches its upper limit of feasibility.
 The general rule applies when computing
the upper and lower limits on the range of
feasibility for maximization problem is:

187
Note: The reverse rule will be true for
minimization problems.
Alternative Method
Assume q1 symbolically represent quantity in
the original model, and stands for change.
Max. Z = 60X1+50X2
Subject to 4X1+10X2 < 100
2X1+X2 < 22
3X1+3X2 < 39

188
• If we consider the same example as in the
previous example, i.e., change in q3 = 39. If q3
changes by some amount, the new q’3 equals
the original q3+ .
• The changes form a separate column
identical to the s1 column in the final simplex
tableau.
• Therefore, to determine the change, we need
only observe the slack (si) column
corresponding to the model constraint
quantity (qi) being changed.

189
Final simplex tableau

60 50 0 0 0 Qty
Cj x1 x2 s1 s2 s3
Basis
s1 0 0 0 1 6 -16/3 24-16/3

x1 60 1 0 0 1 -1/3 9-1/3
x2 50 0 1 0 -1 2/3 4 + 2/3
Z 60 50 0 10 40/3 740
C-Z
0 0 0 -10 -40/3

190
191
192
• Once we have computed these limits, we
proceed to assess the impact that a
contemplated change would have on the
optimal solution.
Example
• The manager in the microcomputer problem is
contemplating a change in the level of the
storage constraint – an increase of 3 cubic feet.
Determine the revised optimal solution for the
change.
Solution
• First, note that an increase of 3 cubic feet is
within the range. Then, the effect of an
increase of three cubic feet is computed in the
following way:
193
194
2.2.2. A Change in an Objective Function Coefficient
• It is useful to know how much the contribution of
a given decision variable to the objective function
can change without changing the optimal solution.
• There are two cases:
– Changes for a variable that is not currently in the
solution mix, and
– Changes for a variable that is currently in the
solution mix.
• If a variable is not currently in the solution in a
maximization problem, its objective function
coefficient would have to increase by an amount
that exceeds the C-Z value for that variable in the
final tableau in order for it to end up as a basic
variable in the optimal solution.

195
• The range over which a non-basic variable’s
objective function coefficient can change
without causing that variable to enter the
solution mix is called its range of
insignificance.
• Range of Insignificance: the range over
which a non-basic variable’s objective
function coefficient can change without
causing that variable to enter the solution
mix.

196
Maximize 3X1 + 2X2 + 5X3
Subject to:
C1 X1 + 2X2 + 2X3 ≤ 18
C2 3X1 + 2X2 + 6X3 ≤ 12
C3 2X1 + 3X2 + 4X3 ≤ 12
X1 , X2, X3 , ≥ 0

197
 C 3 2 5 0 0
Basis 0 Quantit
X1 X2 X3 s s y
s
s 0 0132
0 0 1 1/5 4/5
X1 3 -4/5 12/5
X2 2 1 0 2 0 3/5 12/5
-2/5
0 1 0 0 -2/5
3/5
Z 3 2 6 0 1 12
C-Z 0
0 0 -1 0 -1
0

198
• In the above tableau we see that x is a non-
basic variable.
• To determine the range over which the
objective function coefficient of x would
change without changing the optimal solution,
recall how a variable in a max problem enters
the solution mix.
• Because x is not in solution, its objective
function coefficient would need to increase in
order for it to come in to solution (i.e., to
make its c-z value positive).
• The amount of increase must be greater than
the absolute value of its c-z value, which is
│-1│i.e.
199
its objective function coefficient must increase by
more than 1.
•Hence, the range of insignificance for X is 6 or
less (i.e, its Z value).
• In general the rule is: Range of insignificance for a
non- basic variable is  the Z value of the variable.
The allowable increase is the absolute value of its
own C- Z value.
Range of Optimality
•The range over which objective function
coefficient of a variable that is in solution can
change without changing the optimal values of the
decision variables.
Note, however, that such a change would change
the optimal value of the objective function.

200
• For variables that are in solution, the
determination of the range of optimality
(the range over which the objective
function coefficient of a variable that is in
the solution can change without changing
the optimal values of the decision variables)
requires a different approach.
Divide the values in row C-Z by the
corresponding row values of the variable in
question and follow the following rule for both
maximization and minimization problems.

201
Note: If there is no positive ratio, it means that
there is no upper limit on that variable’s objective
function coefficient.
Example
Determine the range of optimality for the decision
variables in the microcomputer problem.

202
Solution
The final simplex tableau for that problem is
repeated here for convenience.

Cj 60 50 0 0 0
Basis x1 x2 s1 s2 s3 Quan
tity
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
Z 60 50 0 10 40/3 740
C-Z 0 0 0 -10 -40/3
203
 The smallest positive ration is +40. Therefore, the
coefficient of X1 can be increased by Birr 40
without changing the optimal solution.
 The upper end of its range of optimality is this
amount added to its current (original) value.
 Thus, its upper end is (Birr60 +Birr40) = Birr100.

204
• Also, the smallest negative ratio is -10;
therefore, the x1 coefficient can be decreased
by as much as Birr10 from its current value,
making the lower end of the range equal to
(Birr60 - Birr10 )= Birr 50.

205
• The smallest positive ration is +10. This tells
us that the x2 coefficient in the objective
function could be increased by Birr10 to
(Birr50 + Birr10) = Birr 60.
• The smallest negative ratio is -20, which
tells us that the x2 coefficient could be
decreased by Birr20 to (Birr50 - Birr20) =
Birr30. Hence, the range of optimality for the
objective function coefficient of x2 is Birr30
to Birr 60.

206
Thank you!
End of Chapter Two

207