Econ

162 Managerial Economics

First Semester, AY 2022-23

Assignment 1: Linear Programming I

Answer the following questions.

I. Joey makes three fancy door hinges: Baltic, chic and Goethic. All of the materials
used in making these hinges are plentiful except that only 100 square feet of brass plate are
on hand and a maximum of 200 hours of handcrafting labor can be spared. A set of heavy
Baltic hinges requires 2 square feet of brass plate; a set of chic or Gothic requires 1 square
foot. Handcrafting takes 1 hour for a set of Baltic hinges, 3 hours for a set of chics and 1¼
hours for a set of Gothics. Joey can sell the entire production run at a profit P10 for a set of
Baltic or Goethic and P15 for a set of chic.

a) Formulate the linear programming problem.

b) Formulate the dual problem and solve it graphically. What are the optimal values of
the dual main (decision) variables? Of the dual surplus variables?
c) What is the maximum premium that Joey would pay for each extra square foot of
brass plate? For each hour of handcrafting?
d) Solve the primal linear program using complementary slackness. How many sets of
each type of hinge should Joey make? What will Joey’s maximum profit be?

ANS.
a) Let x1 = number of Baltic hinges produced
x2 = number of chic hinges produced
x3 = number of Goethic hinges produced

Maximize π = 10x1 +15x2 +10x3

subject to
2x1 + x2 + x3 ≤ 100
x1 + 3x2 +1.25x3 ≤ 200
x1, x2 , x3 ≥ 0

b)
Minimize C = 100y1 + 200y2
subject to
2y1 + y2 ≥ 10
y1 + 3y2 ≥ 15
y1 +1.25y2 ≥ 10
y1, y2 ≥ 0

y1 = 6.4285; y2 = 2.8571; VOF = 1214.29 or 8500/7 ; s1 = 5.71; s2 = s3 = 0

c) y1 = 6.4285; y2 = 2.8571

d) x1 = 0; x2 = 300/7 or 42.86; x3 = 400/7 or 57.17; VOF = 8500/7 or 1,214.29

Econ 162 Managerial Economics
First Semester, AY 2022-23

II. BRJ manufactures three types of silicon chips for computers: central processing unit
(x1), integrated circuits (x2) and core memories (x3). The following linear program applies:
Maximize π = 0.25x1 + 0.4x2 + 0.15x3
subject to
0.005x1 + 0.02x2 + 0.01x3 ≤ 10, 000 (silicon sheets)
0.2x1 + 0.5x2 + 0.1x3 ≤ 200, 000 (labor in minutes)
x1, x2 , x3 ≥ 0

a) Formulate the dual problem and solve it graphically.

b) What is the maximum premium that BRJ would pay for one additional silicon
sheet? For one additional minute of labor?
c) Use the principle of complementary slackness to determine the solution to the
primal linear program algebraically.
d) Suppose that BRJ can manufacture an all-purpose video game chip at a profit of
P1 per chip. If each game chip requires 0.01 silicon sheet and 0.4 minute of
labor, should any game chips be made?

ANS.
a)
Minimize C = 10000y1 + 200000y2
subject to
0.005y1 + 0.2y2 ≥ 0.25
0.02y1 + 0.5y2 ≥ 0.4
0.01y1 + 0.1y2 ≥ 0.15
y1, y2 ≥ 0

y1 = 3.3333 ; y2 = 1.6667; VOF = 266,666.67

b) y1 = 10/3; y2 = 7/6; VOF = 800,000/3

c) x1 = 666,666.67; x2 = 0; x3 = 666,666.67; VOF = 266,666.67

d) Yes; opportunity cost = 0.5 < 1