08-02-2024

Session-3

Retail Store Problem

A Retail store is planning an advertising campaign aiming to
increase the number of customers visiting its physical location as
well as its online store.
• Each 1000 dollars invested in magazine ads will attract 100
new customers to store, as well as 500 new website visitors.
• Each 1000 dollars invested in online ads will attract 50 new
customers to store, as well as 1000 new website visitors.
• The target is to bring at least 500 new guests to the physical
store and at least 5000 new visitors to the online store.
Formulate an LP to help the store to minimize the cost of the
advertising campaign.

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LP Formulation

• Decision Variables:

• Let x1 be the amount (in thousands of dollars) invested in magazine

ads

• Let x2 be the amount (in thousands of dollars) invested in online ads

• Objective Function:

Minimize Z= x1 + x2

• Constraints:
• Magazine ads attract 100 new customers, and Online ads attract 50
new visitors to the physical store per $1000 spent:
100x1+50x2≥500
• Magazine ads attract 500 new customers and Online ads attract 50 new
visitors to the physical store per $1000 spent:
50x1+1000x2≥5000
• Non-negativity constraints:
x1,x2≥0

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Solution Approaches to LP

• Graphical Method
• Simplex Method/ Revised Simplex Methods
• Interior-point Method

Classification of Solution
• Feasible vs Non-feasible Region
• Feasible, if at least it has one feasible solution and otherwise;

• Optimal Solution: if it has an optimal solution.

• Single (Unique) Optimal vs Multi-optimal (infinitely many Solutions)

• Local or Global Optima

• Bounded vs Unbounded:
• Unbounded: If the solution is feasible and its objective function is
not bounded in the feasible region.

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Graphical Method

The Five Components

The Furniture Factory Problem
1.0 . Max revenue = 45𝑥1 + 80𝑥2
2.0 5𝑥1 + 20𝑥2 ≤ 400 Units of mahogany capacity
3.0 . 10, 𝑥1 + 15𝑥2 ≤ 450 Labor hours capacity

𝒙𝟏, 𝒙𝟐 ≥ 𝟎 , Non − negativity

1.0 . Max (b1 = 45)𝑥1 + (𝑏2 = 80)𝑥2

2.0 𝑎1 1 = 5 𝑥1 + (𝑎1 2 = 20)𝑥2 ≤ 𝐾1 = 400
3.0 . (𝑎2 2 = 10)𝑥1 + (𝑎2 2 = 15)𝑥2≤ 𝐾2 = 450

𝒙𝟏, 𝒙𝟐 ≥ 𝟎

Parametrization of input data

Parametrization of input data of an LP problem allows
one to separate the data from the model. That is, one
can change the values of the data without changing the
model.

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Furniture Factory Problem

Graphical interpretation and solution of an LP problem

x2
Tables

(0,0)
x1 Chairs
Non-Negativity Constraints

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𝑥2
Tables

10𝑥1+15𝑥2 = 450 (Labor)

5𝑥1+20𝑥2 = 400 (Mahogany)

(x1=10, x2=10), h2=200
10

(x1=0, x2=0) (x1=45, x2=0) (x1=80, x2=0) x1 Chairs

𝑥2
Tables

10𝑥1+15𝑥2 = 450 (Labor)

10 5𝑥1+20𝑥2 = 400 (Mahogany)

Feasible Region

(x1=10, x2=0) (x1=45, x2=0) (x1=80, x2=0) 𝑥1 ≥ 0

(x1=0, x2=0) Chairs

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•In the theory of linear programming, the feasible2.0 region is

called a polyhedron. 3.0 .

𝑥2
Tables

(x1=0, x2=30) 10𝑥1+15𝑥2 = 450 (Labor)

(x1=0, x2=20)

Polyhedron 5𝑥1+20𝑥2 = 400 (Mahogany)

(x1=10, x2=0) (x1=45, x2=0) (x1=80, x2=0) 𝑥1 ≥ 0

(x1=0, x2=0) Chairs

•Theorem:
•If a linear programming problem has an optimal solution, there
is at least one optimal solution that is a corner point solution.

•Definitions:
•A solution of an LP problem is a set of values of the decision
variables that satisfies all the constraints of the problem
defined by the polyhedron.
•A corner point solution is a vertex of the polyhedron defining
the feasible region of the LP problem.
•An optimal solution is a solution to the LP problem that cannot
be improved.

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𝑥2
Tables

(x1=0, x2=30)
10𝑥1+15𝑥2 = 450 (Labor)

(x1=0, x2=20)
revenue = 1600 (x1=24, x2=14)
revenue = 2200

5𝑥1+20𝑥2 = 400 (Mahogany)

(x1=45, x2=0) (x1=80, x2=0) 𝑥1 ≥ 0

(x1=0, x2=0)
revenue = 0 Chairs

• Theorem:
• If a linear programming
Vertex Equations problem has an optimal
(0,0) x1 = 0 and x2 = 0 solution, there is at least
𝑥2
one optimal solution that is
Tables (0,20) x1= 0 and 5x1 +20x2= 400 (mahogany)
a corner point solution.
(24,14) 5x1 + 20x2 = 400 (mahogany) and 10x1 +15x2 = 450 (labor)
(45,0) 10x1 + 15x2 = 450 (labor) and x2=0

Infeasible points Equations

(0,30) x1 = 0 and labor equation
30 (Labor) (80, 0) mahogany and x2 = 0

Revenue = 𝑏1𝑥1+𝑏2𝑥2
P2
P3

Polyhedron
(Mahogany)
P4

P1
45 80 𝑥1 ≥ 0
Chairs

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Enumeration approach
Enumeration of solutions of the system of equations for the furniture
problem
Points of interest Vertex of the polyhedron Objective function value. Revenue = 45x1 + 80x2

(0,0) Yes (feasible) 0 = 45*0 + 80*0

(0,20) Yes (feasible) 1600 = 45*0 + 80*20
(24,14) Yes (feasible) 2200 = 45*24 + 80*14 Optimal!!
(45,0) Yes (feasible) 2025 = 45*45 + 80*0
(0,30) No (infeasible) 2400 = 45*30 + 80*30
(80,0) No (infeasible) 3600 = 45*80 + 80*0

Excel Solution

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Decision Variables
x1 x2
24 14

Objective Function c1 c2 value

45 80 = 2200 2200

Constraints x1 x2
Mahogany 5 20 400 <= 400
Labour 10 15 450 <= 450

Non-negativity
0
Constraints x1 x2 >=

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