ASSIGNMENTS

MB 0048
(4 credits)
Set 1
OPERATIONS RESEARCH
Question: 1
Describe in details the different scopes of application of Operations Research.
Answer: 1
Introduction
Optimization is the act of obtaining the best result under any given circumstanc
e. In various practical problems we may have to take many technical or manageria
l decisions at several stages. The ultimate goal of all such decisions is to eit
her maximize the desired benefit or minimize the effort required. We make decisi
ons in our everyday life without even noticing them. Decision-making is one of t
he main activities of a manager or executive. In simple situations decisions are
taken simply by common sense, sound judgment and expertise without using any ma
thematics. But here the decisions we are concerned with are rather complex and h
eavily loaded with responsibility. Examples of such decision are finding the app
ropriate product mix when there are large numbers of products with different pro
fit contributions and productional requirement or planning public transportation
network in a town having its own layout of factories, apartments, blocks etc. C
ertainly in such situations also decision may be arrived at intuitively from exp
erience and common sense, yet they are more judicious if backed up by mathematic
al reasoning. The search of a decision may also be done by trial and error but s
uch a search may be cumbersome and costly. Preparative calculations may avoid lo
ng and costly research. Doing preparative calculations is the purpose of Operati
ons research. Operations research does mathematical scoring of consequences of a
decision with the aim of optimizing the use of time, efforts and resources and
avoiding blunders.
Definition of Operations Research:
1. Churchman, Ackoff and Aruoff have defined “Operations research as the ap
plication of scientific methods, techniques and tools to operation of a system w
ith optimum solutions to the problems”. Here Optimum implies the one, which is b
est of all possible alternatives. Another definition is that, “Operations resear
ch is the use of scientific methods to provide criteria for decisions regarding
man, machine, and systems involving repetitive operations”.
2. An operation research (OR) is an analytical method of problem-solving an
d decision-making that is useful in the management of organizations. In operatio
ns research, problems are broken down into basic components and then solved in d
efined steps by mathematical analysis
Scope of Operations Research (OR)
In general, whenever there is any problem simple or complicated, the OR techniqu
es may be applied to find the best solution. In this section we shall try to fin
d the scope of OR by seeing its application in various fields of everyday life.
i) In Defense Operations: In modern warfare the defence operations are carried o
ut by a number of independent components namely Air Force, Army and Navy. The ac
tivities in each of these components can be further divided in four sub-componen
ts viz.: administration, intelligence, operations and training, and supply. The
application of modern warfare techniques in each of the components of military o
rganizations requires expertise knowledge in respective fields. Furthermore, eac
h component works to drive maximum gains from its operations and there is always
a possibility that strategy beneficial to one component may have an adverse eff
ect on the other. Thus in defence operations there is a necessity to co-ordinate
the activities of various components which gives maximum benefit to the organiz
ation as a whole, having maximum use of the individual components. The final str
ategy is formulated by a team of scientists drawn from various disciplines who s
tudy the strategies of different components and after appropriate analysis of th
e various courses of actions, the best course of action, known as optimum strate
gy, is chosen.
ii) In Industry: The system of modern industries are so complex that the optimum
point of operation in its various components cannot be intuitively judged by an
individual. The business environment is always changing and any decision useful
at one time may not be so good some time later. There is always a need to check
the validity of decisions continually, against the situations. The industrial r
evolution with increased division of labour and introduction of management respo
nsibilities has made each component an independent unit having their own goals.
For example: Production department minimize cost of production but maximizes out
put. Marketing department maximizes output but minimizes cost of unit sales. Fin
ance department tries to optimize capital investment and personnel department ap
points good people at minimum cost. Thus each department plan their own objectiv
es and all these objectives of various department or components come to conflict
with each other and may not conform to the overall objectives of the organizati
on. The application of OR techniques helps in overcoming this difficulty by inte
grating the diversified activities of various components so as to serve the inte
rest of the organization as a whole efficiently.
OR methods in industry can be applied in the fields of production, inventory con
trols and marketing, purchasing, transportation and competitive strategies etc.
iii) Planning: In modern times it has become necessary for every government to h
ave careful planning, for economic development of the country. OR techniques can
be fruitfully applied to maximize the per capita income, with minimum sacrifice
and time. A government can thus use OR for framing future economic and social p
olicies.
iv) Agriculture: With increase in population there is a need to increase agricul
ture output. But this cannot be done arbitrarily. There are a number of restrict
ions under which agricultural production is to be studied. Therefore there is a
need to determine a course of action, which serves the best under the given rest
rictions. The problem can be solved by the application of OR techniques.
v) In Hospitals: The OR methods can be used to solve waiting problems in out-pat
ient department of big hospitals. The administrative problems of hospital organi
zation can also be solved by OR techniques.
vi) In Transport: Different OR methods can be applied to regulate the arrival of
trains and processing times, minimize the passengers waiting time and reduce co
ngestion, formulate suitable transportation policy, reducing the costs and time
of trans-shipment.
vii) Research and Development: Control of R and D projects, product introduction
planning etc. and many more applications.

Question: 2
What do you understand by Linear Programming Problem? What are the requirements
of L.P.P.? What are the basic assumptions of L.P.P.?

Answer 2
Introduction
One of the most important problems in management decision is to allocate limited
and scarce resource among competing agencies in the best possible manner. Resou
rces may represent man, money, machine, time, technology on space. The task of t
he management is to derive the best possible output (or set of outputs) under gi
ven restraints on resources. The output may be measured in the form of profits,
costs, social welfare, effectiveness, etc. In many situations the output (or the
set of outputs) can be expressed as a linear relationship among a number of var
iables. The amount of available resources can also be expressed as a linear rela
tionship among some system variables. The management problem may be to optimize
(maximize or minimize) the out-put or the objective function subject to the set
of constraints An optimization problem in which both the objective function and
the constraints are represented by linear forms is a problem in linear programmi
ng
The standard form of the linear programming problem is used to develop the proce
dure for solving a general programming problem.
A general LPP is of the form
Max (or min) Z = c1x1 + c2x2 + … +cnxn
x1, x2, ....xn are called decision variable.
subject to the constraints

.
.
.

c1, c2,…. Cn, a11, a12,…. amn are all known constants
Z is called the "objective function" of the LPP of n variables which is to be ma
ximized or minimized.

Linear Programming
The Linear Programming Problem (LPP) is a class of mathematical programming in w
hich the functions representing the objectives and the constraints are linear. H
ere, by optimization, we mean either to maximize or minimize the objective funct
ions. The general linear programming model is usually defined as follows:
Maximize or Minimize
Z = c1 x1 + c2 x 2 + – - – - + cn x n
subject to the constraints,
Where cj, bi and aij (i = 1, 2, 3, ….. m, j = 1, 2, 3 ——- n) are constants deter
mined from the technology of the problem and xj (j = 1, 2, 3 —- n) are the decis
ion variables. Here is either (less than), (greater than) or = (equal). No
te that, in terms of the above formulation the coefficient cj, aej, bj
are interpreted physically as follows. If bi
is the available amount of resources i, where aij
is the amount of resource i, that must be allocated to each unit of activity j,
the “worth” per unit of activity is equal to cj.
Canonical forms:
The general Linear Programming Problem (LPP) defined above can always be put in
the following form which is called as the canonical form:
Maximise Z = c1 x1+c2 x2 + —— + cn xn
Subject to
The Characteristics of this form are:
1. All decision variables are non-negative.
2. All constraints are of type.
3. The objective function is of the maximization type.
Any LPP can be put in the canonical form by the use of five elementary transform
ations:
1. The minimization of a function is mathematically equivalent to the maximiz
ation of the negative expression of this function. That is, Minimize Z = c1 x1 +
c2x2 + ……. + cn xn
is equivalent to
Maximize – Z = – c1x1 – c2x2 – … – cnxn.
2. Any inequality in one direction may be changed to an inequality in the
opposite direction by multiplying both sides of the inequality by –1.
3. An equation can be replaced by two inequalities in opposite direction. For
example, 2x1+3x2 = 5 can be written as
4. An inequality constraint with its left hand side in the absolute form can
be changed into two regular inequalities. For example: | 2x1+3x2 | 5 is equiva
lent to 2x1+3x2
5 and 2x1+3x2
– 5 or – 2x1 – 3x2
5.
5. The variable which is unconstrained in sign (i.e., 0, 0 or zero) is eq
uivalent to the difference between 2 non-negative variables. For example, if x i
s unconstrained in sign then x
Example of a Linear Programming Problem:
Example 1: A firm engaged in producing 2 models, viz., Model A and Model B, perf
orms only 3 operations painting, assembly and testing. The relevant data are as
follows:

Unit Sale Price Hours required for each unit

Assembly Painting Testing
Model A Rs. 50.00
Model B Rs. 80.00 1.0
1.5 0.2
0.2 0.0
0.1
Total number of hours available each week are as under assembly 600, painting 10
0, testing 30. The firm wishes to determine the weekly product-mix so as to maxi
mize revenue.
Solution: Let us first write the notations as under:
Since the objective (goal) of the firm is to maximize its revenue, the model can
be stated as follows:
The objective function, Z = 50x1 + 80x2 is to be maximized subject to the constr
aints
Requirements of L.P.P.
i. Decisions variables and their relationship
ii. Well defined objective function
iii. Existence of alternative courses of action
iv. Non-negative conditions on decision variables.
Assumptions of Linear Programming
Certainty.
In all LP models it is assumed that, all the model parameters such as availabili
ty of resources, profit (or cost) contribution of a unit of decision variable an
d consumption of resources by a unit of decision variable must be known with cer
tainty and constant.
Divisibility (Continuity)
The solution values of decision variables and resources are assumed to have eith
er whole numbers (integers) or mixed numbers (integer or fractional). However, i
f only integer variables are desired, then Integer programming method may be emp
loyed.
Additivity
The value of the objective function for the given value of decision variables an
d the total sum of resources used, must be equal to the sum of the contributions
(Profit or Cost) earned from each decision variable and sum of the resources u
sed by each decision variable respectively. /The objective function is the direc
t sum of the individual contributions of the different variables
Linearity
All relationships in the LP model (i.e. in both objective function and constrain
ts) must be linear. Deterministic:
All coefficients of decision variables in the objective and constraints expressi
ons should be known and finite.

Question: 3
Describe the different steps needed to solve a problem by simplex method.

Answer 3
Introduction
The simplex method provides an efficient technique which can be applied for solv
ing LPP of any magnitude involving two or more decision variables. In this metho
d the objective function used to control the development and evaluation of each
feasible solution to the problem.
The simplex algorithm is an iterative procedure for finding the optimal solution
to a linear programming problem. In the earlier methods, if a feasible solution
to the problem exists, it is located at a corner point of the feasible region d
etermined by the constraints of the system. The simplex method, according to its
iterative search, selects this optimal solution from among the set of feasible
solutions to the problem. The efficiency of this algorithm is, because it consid
ers only those feasible solutions which are provided by the corner points, and t
hat too not all of them. We consider a minimum number of feasible solutions to o
btain an optimal solution.
The Standard Form of LPP
The characteristics of the standard form are:
1. All constraints are equations except for the non-negativity condition wh
ich remain inequalities only.
2. The righthand side element of each constraint equation is non-negative.
3. All variables are non-negative.
4. The objective function is of the maximization or minimization type.
The inequality constraints can be changed to equations by adding or subtracting
the left-hand side of each such constraint by a non-negative variable. The non-n
egative variable that has to be added to a constraint inequality of the form t
o change it to an equation is called a slack variable. The non-negative variable
that has to be subtracted from a constraint inequality of the form to change
it to an equation is called a surplus variable. The right hand side of a constra
int equation can be made positive by multiplying both sides of the resulting equ
ation by (-1) wherever necessary. The remaining characteristics are achieved by
using the elementary transformations introduced with the canonical form.

The Standard Form of the LPP

Any standard form of the L.P.P. is given by
Maximize or Minimize
Subject to:
Fundamental Theorem of L.P.P.
Given a set of m simultaneous linear equations in n unknowns/variables, n m, A
X = b, with r(A) = m. If there is a feasible solution X 0, then there exists a
basic feasible solution.
Solution Of The Linear Programming Program – Simplex Method
Consider a LPP given in the standard form,
To optimize z = c1 x1 + c2 x2 + —+ cn xn
Subject to
a11 x1 + a12 x2 + — + an x n
S1 = b1
a21 x1 + a22 x2 + —-+ a2n xn
S2 = b2
………………………………………………………………….
………………………………………………………………….
am1 x1 + am2 x2 + — + amn xn
Sm = bm
x1, x2, — xn, S1, S2 —, Sm
0.
To each of the constraint equations add a new variable called an artificial vari
able on the left hand side of every equation which does not contain a slack vari
able. Then every constraint equation contains either a slack variable or an arti
ficial variable.
The introductions of slack and surplus variables do not alter either the constra
ints or the objective function. So such variables can be incorporated in the obj
ective function with zero coefficients. However, the artificial variables do cha
nge the constraints, since these are added only to one side i.e., to the left ha
nd side of the equations. The new constraint equations so obtained is equivalent
to the original equations if and only if all artificial variables have value ze
ro. To guarantee such assignments in the optimal solutions, artificial variables
are incorporated into the objective function with very large positive coefficie
nt M in the minimization program and very large negative coefficient
– M in the maximization program. These coefficients represent the penalty incurr
ed in making an unit assignment to the artificial variable.
Thus the standard form of LPP can be given as follows :
Optimize Z = CT X
Subject to AX = B,
and
Where X is a column vector with decision, slack, surplus and artificial variable
s, C is the vector corresponding to the costs, A is the coefficient matrix of th
e constraint equations and B is the column vector of the right-hand side of the
constraint equations.
Example 1: Consider the LPP
Minimize Z = 4x1 + x2
Subject to 3x1 + x2 = 3
Rewriting in the standard form,
Minimize Z = 4x1 + x2 + 0.S1 + 0.S2 + M (A1 + A2)
Subject to 3x1+ x2 + A1 = 3
When S2 is slack variable, S1 is a surplus variable and A1 & A2 an artificial va
riables.
Representing this program in matrixes, we have
Minimize Z = (4 1 0 0 M M)
Subject to
=
and
0
Initial basic feasible solution of a LPP
Consider a system of m equations in n unknowns x1, x2 – - xn,
a11 x1 + a12 x2 + – - + a1n xn = b1
a21 x1 + a22 x2 + – - + a2n xn = b2
………………………………………………………
………………………………………………………
am1 x1 + am2 x2 + – - + amn xn = bn
To solve this system of equations, we first assign any of n – m variables with v
alue zero. These variables which have assigned value zero initially are called t
he non-basic variables, the remaining variables are called basic variables. Then
the system can be solved to obtain the values of the basic variables. If one or
more values of the basic variables are also zero valued, then solution of the s
ystem is said to degenerate. If all basic variable, have non-zero values, then t
he solution is called a non-degenerate solution.
A basic solution is said to be feasible, if it satisfies all constraints.
To Solve problem by Simplex Method
1. Introduce stack variables (Si’s) for ” ” type of constraint.
2. Introduce surplus variables (Si’s) and Artificial Variables (Ai) for ”
” type of constraint.
3. Introduce only Artificial variable for “=” type of constraint.
4. Cost (Cj) of slack and surplus variables will be zero and that of Artifi
cial variable will be “M” Find Zj – Cj for each variable.
5. Slack and Artificial variables will form Basic variable for the first si
mplex table. Surplus variable will never become Basic Variable for the first sim
plex table.
6. Zj = sum of [cost of variable x its coefficients in the constraints – Pr
ofit or cost coefficient of the variable].
7. Select the most negative value of Zj – Cj. That column is called key col
umn. The variable corresponding to the column will become Basic variable for the
next table.
8. Divide the quantities by the corresponding values of the key column to g
et ratios select the minimum ratio. This becomes the key row. The Basic variable
corresponding to this row will be replaced by the variable found in step 6.
9. The element that lies both on key column and key row is called Pivotal e
lement.
10. Ratios with negative and “a” value are not considered for determining ke
y row.
11. Once an artificial variable is removed as basic variable, its column wil
l be deleted from next iteration.
12. For maximisation problems decision variables coefficient will be same as
in the objective function. For minimization problems decision variables coeffic
ients will have opposite signs as compared to objective function.
13. Values of artificial variables will always is – M for both maximization
and minimization problems.
14. The process is continued till all Zj – Cj
0.

Question:4
Describe the economic importance of the Duality concept.
Answer:4
Introduction
Every linear programming problem has associated with it, another linear programm
ing problem involving the same data and closely related optimal solutions. Such
two problems are said to be duals of each other. While one of these is called th
e primal, the other the dual.
The Importance Of Duality Concept Is Due To Two Main Reasons
i) If the primal contains a large number of constraints and a smaller number of
variables, the labour of computation can be considerably reduced by converting i
t into the dual problem and then solving it
ii) The interpretation of the dual variable from the lost or economic point of v
iew proves extremely useful in making future decisions in the activities being p
rogrammed.
Formulation of dual problem
Consider the following L.P.P
Maximize Z = c1x1 +c2x2 + . . .+ cnxn
Subject to the constraints
To construct a dual problem, we adopt the following guide lines:
i) The maximization problem in the primal becomes a minimization problem in the
dual and vice versa
ii) (≤) type of constraints in the primal becomes (≥) type of constraints in the
dual and vice versa.
iii) The coefficients c1, c2, . . .,cn in
the objective function of the primal become b1, b2,…,bm in the objective functio
n of the dual.
iv) The constants b1, b2,…,bm in the constraints of the primal becomes c1, c2, .
. .,cn in the constraints of the dual
v) If the primal has n variables and m constraints the dual will have m variable
s and n constraints
vi) The variables in both the primal and dual are non-negative
Then the dual problem will be
Minimize W = b1 y1 + b2 y2 + . . . +bm ym
subject to the constraints
The standard form of L.P.P for maximization must contain “≤” type of constraints
and for minimization problem it must contain “≥” type of constraints. Then it i
s easy to form dual L.P.P
Example 1: Write dual of
max Z = 4x1 + 5x2
Solution: The given problem is in its standard form:
Its dual is
Mini W = 15y1 + 10 y2 + 20 y3
ECONOMICS IMPORTANCE OF DULITY CONCEPT
Duality theory is important for developing computational procedures that take ad
vantage of the relationships between the primal and dual problems. However, ther
e is another less obvious area that also has been heavily influenced by duality,
and that is mathematical economics.
The linear programming problem can be thought of as a resource allocation model
in which the objective is to maximize revenue or profit subject to limited resou
rces. Looking at the problem from this point of view, the associated dual proble
m offers interesting economic interpretations of the L.P resource allocation mod
el.
We consider here a representation of the general primal and dual problems in whi
ch the primal takes the role of a resource allocation model.

From the above resource allocation model, the primal problem has n economic acti
vities and m resources. The coefficient cj in the primal represents the profit p
er unit of activity j. Resource i, whose maximum availability is bi, is consumed
at the rate aij units per unit of activity j.
Economic interpretation of Dual variables:
For any pair of feasible primal and dual solutions,
(Objective value in the maximization problem) ≤ (Objective value in the minimiza
tion problem)
At the optimum, the relationship holds as a strict equation.
Note: Here the sense of optimization is very important.
Hence clearly for any two primal and dual feasible solutions, the values of the
objective functions, when finite, must satisfy the following inequality.
The strict equality, z = w, holds when both the primal and dual solutions are op
timal.
Consider the optimal condition z = w first given that the primal problem represe
nts a resource allocation model, we can think of z as representing profit in Rup
ees. Because bi represents the number of units available of resource i, the equa
tion z = w can be expressed as profit (Rs) = (units of resource i) x (profit p
er unit of resource i)
This means that the dual variables yi, represent the worth per unit of resource
i [variables yi are also called as dual prices, shadow prices and simplex multip
liers].
With the same logic, the inequality z < w associated with any two feasible prima
l and dual solutions is interpreted as (profit) < (worth of resources)
This relationship implies that as long as the total return from all the activiti
es is less than the worth of the resources, the corresponding primal and dual so
lutions are not optimal. Optimality is reached only when the resources have been
exploited completely, which can happen only when the input equals the output (p
rofit).
Economically the system is said to remain unstable (non optimal) when the input
(worth of the resources) exceeds the output (return). Stability occurs only when
the two quantities are equal.