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.
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 6
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
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 9
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
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 13
A Simple Maximization Problem
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 14
A Simple Maximization Problem
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 15
A Simple Maximization Problem
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 16
A Simple Maximization Problem
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 17
Product Mix Problem
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 18
Product Mix Problem
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 19
Product Mix Problem
Optimization Modelling for Business Decisions, Dr. A.K. Sharma, SBM, NMIMS Mumbai 20
