Optimization Modelling for

Business Decisions
Linear Programming Pt 1

Program: FT MBA Core

Trim: II
Instructor: Dr. Abhinav Sharma
 Linear Programming

• Linear programming has nothing to do with computer programming.

• The use of the word “programming” here means “choosing a course of

action.”

• Linear programming involves choosing a course of action when the

mathematical model of the problem contains only linear functions.

y  3386.2  205.1x1  177.4 x2

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 2
 Linear Programming

• The maximization or minimization of some quantity is the objective in all linear

programming problems.
• All LP problems have constraints that limit the degree to which the objective can be
pursued.
• A feasible solution satisfies all the problem's constraints.
• An optimal solution is a feasible solution that results in the largest possible
objective function value when maximizing (or smallest when minimizing).
• A graphical solution method can be used to solve a linear program with two
variables.

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 3
 Linear Programming

• If both the objective function and the constraints are linear, the problem is referred
to as a linear programming problem.
• Linear functions are functions in which each variable appears in a separate term
raised to the first power and is multiplied by a constant (which could be 0).
• Linear constraints are linear functions that are restricted to be "less than or equal
to", "equal to", or "greater than or equal to" a constant.

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 4
 Problem Formulation/ Modelling

• Problem formulation or modeling is the process of translating a verbal statement of

a problem into a mathematical statement.
• Formulating models is an art that can only be mastered with practice and
experience.

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 5
 Problem Formulation/ Modelling

• Understand the problem thoroughly.

• Describe the objective.
• Describe each constraint.
• Define the decision variables.
• Write the objective in terms of the decision variables.
• Write the constraints in terms of the decision variables.

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 Problem Formulation/ Modelling

LP Formulation
Objective
Max 5x1 + 7x2 Function

s.t. x1 < 6
“Regular”
2x1 + 3x2 < 19 Constraints
x1 + x2 < 8
Non-negativity
x1 > 0 and x2 > 0 Constraints

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 7
 Graphical Solution

First Constraint Graphed

x2

8
7 x1 = 6

6
Shaded region
5 contains all
4 feasible points
for this constraint
3
2 (6, 0)
1
x1

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 8
 Graphical Solution

x2

8 (0, 6 1/3)
7
6
2x1 + 3x2 = 19
5
4
Shaded
3
region contains
2 all feasible points (9 1/2, 0)
1 for this constraint
x1

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 Graphical Solution
Third Constraint Graphed
x2 (0, 8)
8
7
6 x1 + x2 = 8

5
4
Shaded
3
region contains
2 all feasible points
for this constraint (8, 0)
1
x1

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 10
 Graphical Solution

x2
x1 + x2 = 8
8
7
x1 = 6
6
5
4
3
Feasible 2x1 + 3x2 = 19
2 Region
1
x1

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 11
 Graphical Solution
Objective Function Line
x2

8
7
(0, 5)
6 Objective Function
5x1 + 7x2 = 35
5
4
3
2
(7, 0)
1
x1

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 12
 Graphical Solution
Optimal Solution
x2 Maximum
Objective Function Line
8 5x1 + 7x2 = 46
7
6 Optimal Solution
(x1 = 5, x2 = 3)
5
4
3
2
1
x1
1 2 3 4 5 6 7 8 9 10

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 A Simple Maximization Problem

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 A Simple Maximization Problem

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 A Simple Maximization Problem

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 A Simple Maximization Problem

Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 17
 Product Mix Problem

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 Product Mix Problem

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 Product Mix Problem

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