Advance Mathematical Methods for Economics (A Book Containing Chapter Summaries & Practice Material) Economics (H) Sem - Ill UGCF Dheeraj Suri Classes wutiits Academy inspiring SUCCESS ... For Full Course Video Lectures Register yourself at www.primeacadmy.in dheerajsuriclasses@ gmail.com AEC eG +91 9899 192027Advance Mathematical Methods for Economics First Edition : August 2023 Earlier Editions were Mathematical Methods for Economics 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, July 2022 Other Tite by the Same Author: Introductory Micro Economics for Eco. (H) Sem. I Introductory Macro Economies for Eco. (H) Sem. II Introductory Mathematics for Economics for Eco. (H) Sem. I Introductory Statistics for Economics for Eco. (H) Sem. I Intermediate Mathematical Methods for Economics for Eco. (H) Sem. II Intermediate Statistics for Economics for Eco. (H) Sem. IT Intermediate Micro Economics for Eco. (H) Sem. Il and IV Intermediate Macro Economies for Eco. (H) Sem. III and IV Statistics 4 Economies for Eco. (H) Sem. III Introductory Econometries for Eco. (H) Sem. III Applied Econometrics for Eco. (H) Sem. V International Economies for Eco. (H) Sem. V Public Economies for Eco. (H) Sem. V Financial Economies for Eco. (H) Sem. V VVVVVVVVVVVVVY For Video Lectures Register yourself at www.primeacademy.inDedicated To my dearest wife Priyanka & my lovely kids Ayush and AnanyaFor Best Result in Economics (Hons) Join Dheeraj Suri Classes Prime Rete inspiring SUCCESS .., For Full Course Video Lectures Register yourself at www.primeacadmy.in dheerajsuriclasses@ gmail.com AMIE ed +91 9899 192027For Full Course Video Lectures of ALL Subjects of Eco (Hons), B Com (H), BBE MA Economics, NTA UGC Net Economics, Indian Economic Service (IES) Register Yourself at www.primeacademy.in Dheeraj Suri Classes Prime Academy +91 9899 192027 Video Lectures are Available for Eco (H) Sem | Introductory Micro Economics Introductory Mathematics for Economics Introductory Statistics for Economics Calculus (GE) Economics (GE) Eco (H) Sem Ill Intermediate Micro Economics | Intermediate Macro Economics | Statistical Methods Data Analysis (SEC) Differential Equations (GE) Linear Programming & Game Theory (GE) Eco (H) Sem V Indian Economy | Development Economics | Applied Econometrics International Economics Public Economics Financial Economics Eco (H) Sem Il Introductory Macro Economics Intermediate Mathematical Methods for Economics Intermediate Statistics for Economics Linear Algebra (GE) Economics (GE) Eco (H) Sem (IV) Intermediate Micro Economics Il Intermediate Macro Economics I! Introductory Econometrics ‘Applied Statistics (GE) Elements of Analysis (GE) Public Finance (GE) Eco (H) Sem VI Indian Economy I Development Economics Il Money & Financial Markets Environmental Economics Full Course Video Lectures are also Available for MA Economics Entrance (DSE, ISI, IGIDR, JNU, IIT JAM etc.) BBE ALL Semesters B Com (H) All Semesters NTA UGC Net Economics Indian Economic Service (IES)Chapter 1 Constrained Optimizatio After learning this chapter you will understand : Two Variables, One Equality Constraint. Lagrange Multiplier Method. Sufficient Conditions for Constrained Optimization. Economic Interpretations of Lagrange Multipliers. Envelope Theorem. For Full Course Video Lectures of ALL Subjects of Eco (Hons), B Com (H), BBE, MA Economics, NTA UGC NET Economics, Indian Economic Service (IES) Register yourself at www.primeacademy.in Dheeraj Suri Classes Prime Academy +91 9899192027Prime Academy, www.primeacademy.in Basic Concepts 1. Constrained Optimization : Constrained optimization is a type of mathematical optimization problem where the goal is to find the best solution for a given objective function, subject to a set of constraints. The objective function is the function that needs to be either maximized or minimized, while the constraints are a set of limitations or restrictions that must be satisfied by the solution. Mathematically, a problem of maximizing (or minimizing) a function fix, y) when x and y are restricted to satisfy an equation g(x, y) = c. Here, f(x, y) is called the objective function and g(x, y) = c is called the constraint. So, we write the problem as Objective function Max (or Min) fix, y) Subject to g(x, y) =¢ Constrained optimization plays a crucial role in various economic scenarios. Here are some economic examples of constrained optimization: (i) Consumer Choice and Utility Maximization: In microeconomics, consumers aim to maximize their utility (objective) subject to a budget constraint. The consumer must decide how to allocate their income to purchase goods and services while staying within their budget limit. The optimal choice involves maximizing utility while considering the prices of goods and the consumer's income as given. In mathematical terms, the consumer faces the problem of choosing quantity of two goods (x, y) in order to maximize utility u(x, y) under a given budget constraint pix + psy =m. (i) Production Optimization: In a manufacturing setting, a company may want to maximize its production output (objective) subject to constraints such as limited resources (e.g., raw materials, labor, machines), production capacity, and environmental regulations. The goal is to find the optimal allocation of resources that maximizes production while adhering to these constraints. In mathematical terms, therefore, the producer faces the problem of choosing ‘quantity of two inputs (L, K) in order to maximize Output Q = F(L, K) under a given cost constraint pil + pxK = C. 2. Two Variables, One Equality Constraint : Consider the problem of maximizing (or minimizing) a function f(x, y) when x and y are restricted to satisfy an equation g(, y) =c. The value of objective function f(x, y) is optimum under the constraint g(x, y) = ¢ when the constraint curve touches the level curve (without intersecting) a level curve of f, The slope of level curve fx, y) = c is given by 2 = ~ £2 and i gi slope of the tangent to g(x, y) = ¢ is — 2 The condition for optimizing the I objective function is _ AGy) _ _ gxy) HGy) _ gheny) @ Ly) oy) AY) 93) On solving equation (i) along with g(x, y which optimize f(x, y) subject to gC, y Mathematical Methods |.2 By Dheeraj Suri, 9899-192027 c determines the two unknowns x and yPrime Academy, www.primeacademy.in Qu. Q2. Qs. Exercise 1 Find the only possible solution to the problem max xy subject to 2x+y=m Find the only possible solution to the problem max fix, y) = x7y" subject to px + y =m Find the only possible solution to the problem max (min) f(x, y) =x + y subject to x7 + 3xy + 3) Answers of Exercise 1 = = fe By A x=m/4,y=m/2, 2. S55) ar fx, y) is maximum at x =3, y ==1 & maximum value of fix, y) is 2 ‘Ax, y) is minimum at x= -3, y = 1 & minimum value of fix, y) is -2 m 7 Basic Concepts Lagrange Multiplier Method : The Lagrange multiplier method is a powerful technique used in constrained optimization problems to find the extreme values (maximum or minimum) of a function subject to one or more constraints. In the Lagrange multiplier method for constrained optimization with two variables and one constraint, we aim to find the extreme values (maximum or minimum) of a function f(x, y) subject to a single constraint g(x, y) = c. The method involves introducing a Lagrange multiplier 2 to construct the Lagrange function and then finding the critical points to determine the extreme values. Here, fix, y) is called the objective function and g(x, y) = is called the constraint. Optimization Under Constraints by Lagrange’s Multiplier Method : When an objective function Z = fix, y) is to be optimized subject to a single constraint (2 y) —k = 0, the following steps are required : (Construct an Auxiliary Function (or Lagrange Function) V of three variables defined as : Vix, y, A) = fo, y) — Mee, y) — K], where 2 is known as Lagrange Multiplier. (ii) Find the partial derivatives of V w.r.t such that V, = 0, V, = 0 and Vi = values of x and y, eg., (a, b). (iii) Find the partial derivatives Vex, Vey, Vyy and gx» Jy- (iv) Find the value of the Bordered Hessian Determinant y and 2 and put them equal to zero, and solve these equations to get the 8 8y ve OV, xx xy ie, V. Py xy Yyy (v) If || > 0 then function is maximum at (a, b) and if |f2| < 0 then function is minimum at (a, b).Prime Academy, www.primeacademy.in Exercise 2 QI. Find the maxima or minima of the function < y? —ay subject to 24 = x + 2y. Q2. Find the maxima or minima of the function z = 12xy —3y?— x? subject to x+2y—24=0. Q3. Solve the problem : Max. (Min.) f(%,y)=2° +y" subject to g(x,y) = Q4. Use the method of Lagrange multiplier to find : () the minimum value of x + y, subject to the constraint xy = 1; (i) the maximum value of xy, subject to the constraint x + y = 16. Comment on the geometry of each solution. [Eco. (H) 2008] QS. Find the maximum and minimum of : ‘fix. y) = 5x— 3y subject to the constraint x2 +y? = 136. (Eco. (H) 2011] Q6. Maximize fix, y) = 100Inx + 50Iny, where x > 0,y >0 Subject to 3x + y= 10. [Eco. (H) II Sem. 2015(ER)] Q7. Maximize the function Z = xy, subject to the constraint x + y = 1. Compare it with minimizing the function g = (x + y), subject to the constraint xy = 4. (Eco. (H) II Sem. 2013] Q8. Solve the optimization problem using Lagrange’s method Max f (%1,X2) = x95x25 subject to 100—2x;-3x2=0. [BBE If Sem. 2013] Q9. Solve the following problem by Lagrangean method. [BBE II Sem. 2014] Max 12x Jy Subject to 3x +4y = 12. QUO. Find the maximum and minimum values of : fayyyaxty Subject to the constraint : gy yexrty a4 Write down the Lagrangean function for the problem and solve the necessary conditions for the optimal solutions. Find the determinant, D(x, y) and check the second order condition. Explain the optimization solution geometrically by drawing the level curves of f(x, y) together with the graph of the constraint. (Eco. (H) II Sem. 2012] QI1. Solve, using Lagrangian method, the following problem :[Eco. (H) II Sem. 2014] Min f(y) =x+y xy Subject to xt-y=l Also explain the problem geometrically by drawing appropriate level curves for f together with the graph of the parabola x°-y=1. Does the associated maximization problem have a solution? Justify your answer. Q12. Find the maximum and minimum values that the function f(x, y) = xy takes on the constraint : (Eco. (H) II Sem. 2016] QI3. Use the Lagrangean method to find the extreme values of fix, y) = x7 + 2)? on the circlex?+y?=1 (Eco. (H) II Sem. 2017] Mathematical Methods = |.4 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in Questions from Recent Eco (H) Examination Q14. A point moves on the curve x? + y? = 100. At what point is its distance from the point (x, y) = (10, 8) minimum? If the constant 100 in the equation of the curve were to be increased by one unit, what is the instantaneous effect on the minimum distance. [Eco. (H) II Sem. 2019] QIS5. Use the method of Lagrange multiplier to find the following two — () The minimum value of x + y subject to the constraint x1/2y1/? = 2 (ii) The maximum value of x*/2y/? subject to the constraint x + y = 4. [Eco. (H) I Sem. 2021] Answers of Exercise 2 1, Min. z= 612 at x=6,y =9, 2. Max. z= 528 atx=9, y=7, 3. Minimum at (1, 1), maximum at (-1,-1), 4.) Minimum at (-1, -1) and Maximum at (1, 1); (ii) Maximum at (8, 8), x Maximum at (10, —6), Minimum at (-10, 6) , 5040 : 14, At (52,44) the distance is minimum. Basic Concepts 1. Economic Applications of Lagrange Multiplier : Lagrange multipliers are an essential tool in optimization problems where certain constraints must be satisfied. They have numerous economic applications, especially in microeconomics and econometrics. Here are some economic applications of Lagrange multipliers: (i) Utility Maximization: In microeconomics, consumers aim to maximize their utility (satisfaction) subject to a budget constraint. Lagrange multipliers help find the optimal combination of goods and services that maximize utility while considering the budget constraint. (ii) Profit Maximization: Firms aim to maximize their profits by choosing the optimal combination of inputs (e.g., labor and capital) while considering production constraints. Lagrange multipliers help identify the optimal input levels for profit maximization. (iii) Cost Minimization: Firms seek to minimize production costs while achieving a certain level of output, Lagrange multipliers can be used to find the optimal combination of inputs that minimize costs under production constraints. 2. Economic Interpretation of 2: The Lagrange Multiplier ‘2° is referred to as a shadow price or marginal value imputed to a unit of resource. Consider the problem Max f(x,y) subject to g(x,y) =c Suppose x* and y* are the values of x and y that solve this problem. In general x* and y* depend on c. we assume that x* = x*(c) and y* = y*(c) are differentiable functions of c. The associated value f* of f (x, y) is then also a function of c, with FO=fE'O,¥O) Mathematical Methods = |.5 By Dheeraj Suri, 989 92027Prime Academy, www.primeacademy.in Here f*(c) is called the optimal value function for the problem. The Lagrange multiplier A = X(c) is the rate at which the optimal value of the objective function changes with respect to changes in the constraint constant c. Such that TELM) > df= Ade In particular de is a small change in c then f'(c + de) — f*(c) ¥A(c).de For some specific economic problems the meaning of 4 is discussed as under : (i) Cost Minimisation : Let Q = (L, K) be the production function of a firm, where K and L denote the units of capital and labour respectively and Q denotes the level of output. Let r and w be the per unit price of capital and labour respectively. If the producer wants to minimize his cost subject to a given level of income or output target, the lagrange function can be written as V =rK + wh 2{AL, K)— Q]. Here, ?. represents the marginal cost of the firm. (ii) Revenue or Profit Maximization : Let Q = f(L, K) be the production function of a firm, where K and L denote the units of capital and labour respectively and Q denotes the level of output. Let r and w be the per unit price of capital and labour respectively. If the producer wants to maximize his revenue subject to a given level of Cost (C), the lagrange function can be written as V = tL, K) — A[rK + wl — C]. Here, i represents marginal productivity. (iii) Equilibrium of the Consumer : If we want to find the equilibrium condition of a consumer with utility function v= f(x,y) and the budget constraint xp, + yp, =, where the symbols have their usual meanings, the lagrange function can be written as V = U-A[xp,+yp,-M]. Here, the lagrange multiplier ‘i’ represents the marginal utility of money income. Note : If the consumer wants to minimize M subject to a given level of satisfaction, the Lagrange function can be written as V = xp, + yp, — AL f(x, y)-U]. Minimising Cost QI. A producer desires to minimize his cost of production C = 2L + 5K where L and K are inputs, subject to the production function Q = LK. Using Lagrange Multiplier Method find the optimum combination of inputs if total output is 40 units. Q2. The production function of a firm is Q = K'7L'? and prices of capital and labour are fixed at Rs. r and w respectively. (i) Find the cost minimizing combination of capital and labour. (ii) Derive the demand functions of capital and labour. (iii) Derive the cost function of the firm.Prime Academy, www.primeacademy.in Q3. If x=a¥Vzx is the production function, find the amounts of the factors used at given prices P,, and Px to produce an output X at smallest cost. In case of Pure competition on the market for X with demand law x= f-a.p. Show that the demand for the factors are : ro 8 [Pe 2aPe and x 8 [Pe 22h, [Eco. (H) 1996] AVR A A\R A Maximising Output or Profit Q4. Optimize the following CES production function subject to the given constraint : q=800.4K°* +0.6L°*)' subject to 5K + 2L = 150.[BBE II Sem. 2013] QS. A firm’s production function is given by Q=3VL+5VK , where Q is the output of the firm and L and K are the two inputs, labour and capital, The wage rate is Rs. 6 and price of capital is Rs. 4 per unit. The price of output is Rs. 200. (a) _ If the firm is prepare to spend Rs. 62,000 on the two inputs, what would be the optimum levels of labour, capital and output? (b) Find the firm’s profit. [Eco. (H) 2006] Q6. A monopolist firm has the following demand functions for its product in two markets, denoted by x and y x #f290.5P,, y= 120-P, The combined cost function is C=? + xy +y2+35. And the maximum joint production is 40. Thus x + y = 40. Find the profit maximizing level of (a) output (b) prices and (c) profit. [B.B.E. 2004, Eco. (H) 2010] Q7. A manufacturer is planning to sell a new product at a price of Rs. 350 per unit and estimates that if x thousand rupees is spent on development and y thousand rupees 250. is spent on advertisement, consumer will by approximately ( y the product. If manufacturing costs for this product are Rs. 150 per unit, how much should the manufacturer spend on development and how much on advertisement to generate the largest profit. Q8. A manufacturer has plans to sell a new product at a price of Rs. 150 per unit. He estimates that if he spends x thousand rupees on development and y thousand PE, BO nits of the product will be sold. y+2 x42 The cost of production is Rs. 50 per unit. If the manufacturer has a total of Rs. 8,000 to spend on development and promotion, how should this money be allocated to generate the largest possible profit? rupees on promotion, approximately Maximising Utility Subject to Budget Constraint Q9. Given the utility function U = (x + 2)(y + 1), and the budget constraint 2x + Sy = 51 find the optimum levels of x and y purchased by the consumer. Q10. A consumer’s utility function is given as : Mathematical Methods = |.7 By Dheeraj Suri, 989 92027Prime Academy, www.primeacademy.in u= where x1, x2 denote the quantities of two products consumed by the consumer and the prices per unit of the goods are Rs. 20 and Rs. 10 respectively. Determine the optimum level of commodities to maximize his utility and spend his total income of Rs. 640 on the two goods. QUL. If «=4/xy is the utility function, Py = Py = Rs. 10 and Income = Rs. 100, find the demands that maximize utility. Check the second order condition. [Eco. (H) 2002, B.B-E. 2005] Q12. An individual has a utility function w = qiq2 based on the two commodities purchased q; and q2. The prices for these are p; and p, respectively, while his total income is M. Construct an optimization problem by using the Lagrange method. How much of each commodity should he purchase in order to attain maximum utility? (Eco. (H) I Sem. 2015(ER)] Q13. A consumer has utility function U(x, y) = (x- a)" (y—b)*, where x and y are the quantities of the two goods that he can consume. He buys the goods at fixed prices p. and p,, Subject to a ceiling M on total expenditure. If he maximizes U, obtain the demand functions for each good in terms of income M and prices p, and p,. show that the total expenditure on each good is a linear function of M. [Eco. (H) 1998] Ql4. Show that two utility maximizing consumers with utility functions : Uj.) = ald? and V(x,x respectively have same demand functions [Eco. (H) 2008] QIS. An individual purchases quantities x; and x2 of two goods whose prices are p; and p2 respectively. His utility function is : UCtn as) = 41 + logy. Assuming his income is M, find the optimal quantities x) and x:. Also find the marginal utility of income. [Eco. (H) 2007, B.B.E. 2010] QI6. A consumer spends an amount m to buy x units of one good at the price 6/unit and y units of a different good at price 10/unit. m is positive. The consumer utility function is Ucx, y) = xy +9? + 2x + 2y Find the optimal quantities of x* and y* as function of m. what are the solutions for ax* and y* if m <8? [Eco. (H) 2010] QI7. A consumer’s utility is a function of two goods X and Y and is given by U= 100logX + 50logY If the consumer's budget is Rs. 10 and the price of X is Rs. 3 and the price of Y is Rs. 1, find the quantities of X and Y that the consumer should purchase to maximize utility. What is his marginal utility of Money? [Eco. (H) 2011] QI8. Given the utility function U = xm and Budget constraint yo — pix: + pata = 0. Derive the Marshallian demand functions for the goods. [BBE II Sem. 2013] QI9. Let U(x, y) be defined for all x > 0, y > 0 by U(Q,y)=In@* + y*)-Iny* (ais a positive constant). Is U(x, y) a homogeneous function? Suppose U(.x, y) is a utility function for a society with x denoting the economic activity level and y the level of Mathematical Methods |. By Dheeraj Suri, 989 92027 ayPrime Academy, www.primeacademy.in pollution. Assume that the level of pollution y depends on the activity level by the equation y'-ax'-b=0, (a and b are positive). Find the activity level that maximizes U(x, y) subject to the constraint. [Eco. (H) 2009] Q20. An individual purchases quantities x, y, z of three different commodities whose prices are p, r, s respectively. The consumers income is M where M > 2p and consumers utility function is given by : U(x, y, z) =x + ln(y2). Find the consumers demand for each good as a function of price and income. Show that the expenditure on good y and z is always equal to the price of the first good. [Eco. (H) 2009] Q21. The incomes of an individual in current and next year are Rs. 500 and Rs. 792 respectively. His utility function of the two income streams is U = x!2y!2, where x and y denote the current and the next year income respectively. If the market rate of interest is 10% p.a., determine the amount the consumer should borrow or lend in current year to maximize his utility. [Eco. (H) 2001] 6 46 x Q22. Consider an individual who maximizes utility function ansr » Where 5 8 <1, 6 £0, subject to the usual linear budget constraint. Show that the constrained utility maximization exercise yields the shares of x and y as : ~~ where k = 6/(6 — 1). If 6 tends to zero, what (2) P. happens to these shares? [Eco. (H) 2005] S.= [Hint : Share of x = Q23. A consumer’s utility function for the two goods is : UG yyax'?y'?, Write down the necessary conditions for the solution of the constrained optimization problem for general values of p,, p, and M. Find the optimal values of x and y and the corresponding value of 4. Check the second order conditions. What are the consumer’s demand functions for x and y? Find the indirect utility function i, eu U"(p,.p,.M) and verify that 2 = M" (Eco. (H) I Sem. 2012] Q24. Maximize the utility function : [Eco. (H) II Sem. 2015] U=f%y)=Ina)+y Subject to the budget constraint P.X+ P,Y=M |. Check the second order conditions. What can you comment on the shape of the level curves? Q25. A consumer’s utility function of two goods x and y is given by U = alnx + flny (where , Bare positive constants) Consumer’s budget constraint is given by Mathematical Methods = 1.9 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in px + qy =m (where p and q are per unit prices of goods x and y respectively and m is money income). (i) Using the Lagrangean method, find the optimal values of goods x and y as functions of p, q and m. (ii) Check the second order condition. Gii) Find the optimal value function U*(p, q, m). Find 2 and give its economic interpretation. (Eco. (H) II Sem. 2016] Q26. A consumer faces the following utility maximization problem Max U(x, y) = 100 - e~* — e- subject to px + qy = m, where x > 0, y > 0. Here, p and q are per unit prices of goods x and y respectively and m is the consumer's money income. (Eco. (H) II Sem. 2018] () Find the necessary conditions for the solution of the problem and solve them for the two demand functions x = f(p, q, m) and y = g(p, q, m) by using the Lagrangean method. Gi) What happens to optimal values of x and y if per unit prices of both goods and consumer’s money income are doubled? Q27. A consumer’s utility function for two goods is U(x, y) = 1 gx? +99), O 0 then stationary point is maxima and if | H,| <0 then stationary point is minima. Exercise Find the possible solution to the problems Max x*y3z subject tox+y+z= 12 An individual purchases quantities x, y, 2 of three different commodities whose prices are p, r, s respectively. The consumers income is M where M > 2p and consumers utility function is given by : U(x, y, 2) =. + In [Eco. (H) 2009] Find the consumers demand for each good as a function of price and income. Show that the expenditure on good y and z is always equal to the price of the first good. Consider the problem Minx? + y2 +z? subjecttoxt+y+z=1. Using Lagrange Multiplier method find its solution. Also determine if the corresponding maximization problem has any solution.Prime Academy, www.primeacademy.in Q4. Qs. ai. Qa. Consider the problem Minx +y+z subject to x? + y? +27=1. Using Lagrange Multiplier method find its solution. Solve the problem Minx + 4y + 3z subject to x? + 2y? +42? = b. (Suppose that b > 0 and take it for granted that the problem has a solution. Answers of Exercise 4 M. x=4,y=6,2 x= 13, y= 3,25 1/3, 4. The minimum point is (a, 2a, 9a), where a = -Vb/6, Basic Concepts Optimization Under More Than One Constraints by Lagrange’s Multiplier Method : When an objective function Z = flx1, x, ... %n) is to be optimized subject to a more than one equality constraints BCX, X2, -.. Xn) = C1, BCC, X2, ... Xn) = the following steps are required : @ Construct an Auxiliary Function (or Lagrange Function) V defined as : VOR, x2, Xn) = fer, ¥2, «.. Xn) — LPL Ay- (gj (1, x2, ... xn). (ii) Find the partial derivatives of V w.r.t all the variable and put them equal to zero. (iii) Solve these equation with equality constraints to obtain the values of all variables. + 8m(X1, X2, --. Xn) = Cm Exercise 5 Solve the problem Max(min) f(x, y, 2) = x? + y? +2? Subject to the constraints x+2y+2=1 and 2x-y-32=4 Solve the following problem Min f (x,y,z) = x2 —2x+2y? +227 +2 Subject to the constraints x+y+z=land2x-y-z=5 By using Lagrange method, find possible solutions to the problem Max(min) f (x,y,z) = x+y +z Subject to the constraints x? +y? +2? = Landx—- Solve the problem Max(min) f (x,y,z) =x +y Subject to the constraints x? 4+ 2y? +27 = 1andx+y+Prime Academy, www.primeacademy.in Ql. Q. nswers of Exercise 5 16 f(x,y, 2) is minimum for x y= ed 15 f(y, z) is minimum for x = 2,y x,y, 2) is minimum for x = —4,y = -2,2 = —2, and f(x,y, 2) is maximum 9,2) is minimum f yin 2 and f(e,9,2) is maxi forx = 1,y=0,2=0. f (x,y,z) is minimum for x =0,y =0,z=1., and f(x,y,z) is maximum for xatysiz=-2 Basic Concepts Economic Interpretations of Lagrange Multipliers : When an objective function Z = fix, x2, ... Xx) is to be optimized subject to a more than one equality constraints SiC X2, os Fn) = C1 SaKs ¥2, 2. Xn) = C2, «25 Sms X25 + Xn) = Cm then the Lagrange Multiplier 4; = 2;(c) for the i constraint is the rate at which the optimal value of the objective function changes w.r.t. changes in the constant c.. The number A; is referred to as a shadow price or marginal value imputed to a unit of resource i. Suppose we change the constants ¢ = (c1, ¢2, ..., ¢m) by de = (de1, de2, ..., dem) then df*(c) = YM hyde, And, f*(¢ + de) = f*(c) +0" t y) Exercise 6 Consider the problem Max(min) f (x,y,z) = x? + y? + 2? Subject to the constraints x42y+c= 1 and 2x-y-32=4 (i) Solve this problem using Lagrange Multiplier Method. (ii) Suppose we change the first constraint to x + 2y + ¢ = 0.9 and the second constraint to. 2x - y — 3z = 4.1, estimate the new value of the objective function. Consider the problem Max f(x,y) = x+y Subject to g(x,y) =x? +y =1 (i) Write down the Lagrangean function for the problem and solve the necessary conditions in this case. Gi) If the constraint is replaced by g(x,y) = x + y = 1.1 then find the change in the optimal value of the objective function. Q3.(i) Solve the following problem Gi) Max(min) f(x,y) =x+y Subject to the constraints x? + 2y? +227 =1 and x+y+c=1, Suppose the constraints changes to x? + 2y? +z? = 0.9 and x+y+z2=1.2Prime Academy, www.primeacademy.in 1). (ii). 2.) 3. Q4. What is the approximate change in the maximum/minimum values of the objective function. Answers of Exercise 6 =i7- noctnerecl z= df*(c) ==, New f*(c) = a x=ty=%eli) df= F@Y/2) is, minimum for x 4 xehyshc5-2 0,y =0,2=1, and f(x,y,2) is maximum for Basic Concepts Envelope Theorem : This theorem is used to determine the change in the value of objective function due to change in the value of a parameter. Let z = fx, y, a) be an objective AiGflon witha. parameter a. thea first of al find dE g@ye at which the function is maximunvminimum, Then find the value 2 at that point, represents the rate of change of optimum value of the objective function as parameter ‘a’ changes. This optimum value represented as z* can also be obtained by substituting the value of x and y at optimum point in the given function z = fx, y, a) Exercise 7 Envelope Theorem Determine the effect of an increase in the value of a on the optimum value of the function y= 2x? -ax+a", Determine whether the function z=." + y’ -2ax-day+a° has a maxima or minima, where a is a positive parameter. If z* denote the optimum value of the function, find “~ by envelope theorem. Verify your answer by alternative method. la Determine whether the function ¢=4a~x?—y? subject to the constraints ax +3ay = 10 has a maxima or minima, where a is a positive parameter, If z* denote the optimum ee de - value of the function, find “by envelope theorem. Verify your answer by la alternative method. A firm uses inputs L and K to produce a target level of output Q = LK. The prices per unit of Land K are w and r, respectively. Using the Lagrangian method solve the following minimization problem [Eco. (H) II Sem. 2014] Min CLK) = wh +k LK Subject to Q=LKPrime Academy, www.primeacademy.in (i) Find the cost minimizing inputs L* and K*. (ii) Find the optimal value function C* as a function of w, r and Q. (ii) Apply the envelope theorem to find the derivative of the optimal value function C*(w, r, Q) with respect to Q. QS. x(a,b) = AVab is a production function for good x and y using inputs a and b, Use the Lagrangian method to find the amount of factors required to produce an output % at minimum cost, when prices of inputs are p, and p,. Check the second order conditions and verify the envelope theorem. Q6. Let f(x,y) = (x? — @xy)e” be a function of two variables with o as a constant and a 40. (i) Find the critical points of f and decide for each of them if it is a local maximum point, local minimum point or a saddle point. (i) Let (x, y*) be the critical point where x* # 0 and let f*(ct) = fix", y*). Find LO and show that if we define f(x,y,a) = (x? —axy)e? then co to [Eco. (H) IT Sem. 2022] Maxima, —— xima, 7 For Full Course Video Lectures of ALL Subjects of Eco (Hons), B Com (H), BBE, MA Economics, NTA UGC NET Economics, Indian Economic Service (IES) Register yourself at Www.primeacademy.in Dheeraj Suri Classes Prime Academy +91 9899192027Chapter e Linear Programming After learning this chapter you will understand : Linear Programming Problem. Formation of Linear Programming Problem. Solution of a LPP by Graphical Method. Duality Theory. Shadow Price. For Full Course Video Lectures of ALL Subjects of Eco (Hons), B Com (H), BBE, MA Economics, NTA UGC NET Economics, Indian Economic Service (IES) Register yourself at www.primeacademy.in Dheeraj Suri Classes Prime Academy +91 9899192027Prime Academy, www.primeacademy.in Basic Concepts 1. Inequation : A mathematical statement comparing two terms with less than (<) or greater than (>) sign is known as inequation, Linear Programming : Linear programming is an optimization technique for finding an optimal solution (maximum or minimum) for an objective function, which is a linear function of two or more variables, subject to various constraints in the form of linear inequations (or equations). wv Note : Every linear programming problem has two important features : (an objective function to be maximized or minimized. (ii) constraints or restrictions. 3. Objective function : A linear function of two or more variables which has to be maximized or minimized, under the given restrictions in the form of linear inequations, is called objective function. 4. Linear constraints : The linear inequ ations in one or more variables are called the linear constraints. 5. Non-negativity constraint : A set of constraints that require the value of each decision variable to be either zero or more than zero. 6. Solution of a Linear Programming Problem : A set of values of decision variables which satisfy all the linear constraints of a linear programming problem is called the solution of such LPP. 7. Feasible solution : Any solution of a LPP which also s restrictions of such LPP is called feasible solution. Feasible region : The set of all feasible solutions is called the feasible region. Infeasible solution : Any point lying outside the feasible region of the LPP. It violates any one or more constraints. 10. Optimal feasible solution : Any point in the feasible region which maximizes or minimizes the objective function is called the optimal solution. 11. Optimization technique : The processes of obtaining the optimal solution are called optimization technique. 12. General model of LPP : The general model of a LPP having n decision variables and m constraints can stated in the following form : Maximize or minimize 7 = 64,434, + 6,4, Hout e,xy itisfies the non negativity oe Subject to the linear constraints : Gy 1Xy + Ay2Xz + Ay3X3 +. 4X1 + Az2X2 + Gy3X3t- Fdintn(S = 2)br stOonXn(S, m1 X1 + Am2X2 + AmzXzt....- +OmnXn(S,=,2)bn And, 4, Xop00veeeXn ZO where, (i) Zis the objective function Gi) “x, are decision variables. Mathematical Methods 22 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in (iii) In the set of constraints (<, =, >) means that each constraint may have any one of these three sign. 13. Steps required to Form a LPP : To form a LPP from the given problem the following steps are taken : (i) Identify decision variables from the given problem and denote them by x1, Bijcerecshas (ii) Form the objective function expressing it as a linear combination of decision variables. (iii) Identify the constraints and express them in the form of linear inequations (or equations) of decision variables (iv) Add the non-negativity restriction on the decision variables, because the physical objects can never have negative values. Exercise 1 Formation of a Linear Programming Problem : QI. A carpenter has 90, 80 and 50 running feet respectively of teak, plywood and rosewood. The product A requires 2, | and | running feet and product B requires 1, 2 and 1 running feet of teak, plywood and rosewood respectively. If A would sell for Rs. 48 and B would sell for Rs. 40 per unit, how much of each should he make and sell in order to obtain the maximum gross income out of his stock of wood. Give a mathematical formulation to this linear programming problem Q2. A factory owner has to purchase two types of machines, A and B, for his factory. The requirements and limitation for the machines are as follows : Area occupied by Skilled men for Daily output in the machine each machine units Machine A 1000 sq. M. 12 men 60 Machine B 1200 sq. M. 8 men 40 He has an area of 9000 sq m. available and 72 skilled men who can operate the machines. Form a LPP to determine how many machines of each type should he buy to maximize the daily output? Q3. A company uses three machines to manufacture two types of shirts, of half sleeves and full sleeves which they make and sell. The number of hours required on machines M1, M2, M3, for one shirt of each type are as follows: M M> Ms Half sleeves 1 = /S Full sleeves 2 1 8/5 None of the machines can be operated for more than 40 hours per week. The profit on each half sleeves shirt is Rs. 1 and profit on each full sleeves shirt is Rs. 1.50. Form the above problem as LP model to find how many of each type of shirts should be made in maximizing the company’s profits? DO NOT SOLVE Q4. °°, A boat manufacturing company, makes three different kinds of boats. All can be made profitably in this company, but the company’s production is constrained by the limited amount of labour, wood and screws available each month. The Mathematical Methods 2.3 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in director will choose the combination of boats that maximizes his revenue in view of the information given in the following table: Input Row Boat |Canoe | Kayak | Monthly Availability Labour 12 7 9 1260 hours Wood Board (feet) _| 22 18 16 19008 Screws (kg) 2 4 3 396 k; Selling Price in Rs._| 4.000 2,000 5,000 Formulate the above as a linear programming problem. Q5. Two tailors, A and B, earn Rs. 150 and Rs. 200 per day respectively. A can stitch 6 shirts and 4 pants while B can stitch 10 shirts and 4 pants per day. Form a linear programming problem to minimize the labour cost to produce at least 60 shirts and 32 pants. Q6. A horticulturist wishes to mix fertilizer brands that will provide a minimum of 15 units of potash, 20 units of nitrates, and 24 units of phosphates. Brand 1 provides 3 units of potash, | unit of nitrates and 3 units of phosphates; it costs Rs. 120. Brand 2 provides 1 unit of potash, 5 units of nitrates and 2 units of phosphates; it costs Rs. 60. Formulate the above as a linear programming problem to find the least cost combination of fertilizers that will meet the desired specifications. Q7. A carpenter has started a workshop in which he manufactures handcarts. Each cart consists of a frame and two wheels. A frame uses 3 hours and a wheel uses 2 hours of labour of which 90 hours per week are available. The carpenter wants that he should manufacture at least 10 carts during a week. The cost of a frame is Rs. 500 and that of wheel is Rs. 200. Formulate the above as a linear programming problem to Minimize the cost. Q8. A retired person wants to invest up to an amount of Rs. 30,000 in the fixed income securities. His broker recommends investing in two bonds- bond A yielding 7% per annum and bond B yielding 10% per annum. After some consideration he decides to invest at the most Rs. 12,000 in bond B and at least Rs. 6,000 in bond A. He also wants that the amount invested in bond A must be at least equal to the amount invests in bond B, Formulate LPP if the investor wants to maximize his return on investment. Q9. A person is interested in investing Rs. 50,00,000 in a mix of investments. The investment choices and expected rates of return on each one of them are: Investment Projected Rate of return Mutual Fund A 0.12 Mutual Fund B 0.09 Money Market Fund 0.08 Government bonds 0.085 Share Y 0.16 Share X 0.18 The investor wants at least 35 percent of his investment in Government bonds. Because of the higher perceived risk of two shares, he has specified that the combined investment in these not to exceed Rs. 80,000. The investor also has Mathematical Methods 2.4 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in specified that at least 20 percent of the investment should be in the money market fund and that the amount of money invested in shares should not exceed the amount invested in mutual funds. His final investment conditions is that the amount invested in mutual fund A should be not more than the amount invested in mutual fund B. The problem is to decide the amount of money to invest in each alternative so as to obtain the highest annual total return. Formulate the above as a linear programming problem. Ql0. A Mutual Fund Co. has Rs. 15 lakhs available for investment in government bonds, blue-chip stocks, speculative stocks and short term bank deposits. The annual expected retums and risk factors are given below : Investment Type Expected Return Expected Risk (0 to 100) Government Bonds 9% ir Blue-chip Stock 20% 25 Speculative Stocks 35% 45 Short-term Deposits 6% 5 The mutual fund is required to keep at least Rs. 2 lakhs in short term deposits and not to exceed an average risk factor of 45. Speculative bonds must be at the most 15 % of the total amount invested. How should the mutual fund invest to maximize its total expected annual return, Formulate this as a linear programming problem. DONOT SOLVE. QI1. Shyam, an agriculturist, has a farm with 125 acres. He produces radish, peas and potato. Whatever he raises, is fully sold in the market. He gets Rs. 5 for radish per kg., Rs. 4 for peas per kg and Rs. 5 for potato per kg. The average yield is 1500 kg of radish per acre, 1800 kg of peas per acre and 1200 kg of potato per acre. To produce each 100 kg of radish and peas and to produce each 80 kg of potato a sum of Rs. 12.50 has to be used for manure. Labour required for each acre to raise the crop is 6 man-days for radish and potato each and 5 days for peas. A total of 500 man-days of labour at rate of Rs. 40 per man-days are available. Formulate this as a linear programming model to maximize the Agriculturist’s total profit. Q12. A 24 hour supermarket has the following minimal requirements for cashiers: Period 2d 2 3 4 5 6 Time of day 23-7 7-11 11-15 15-19 19-23 23-3 (24 hour clock) Minimum no. required 7 2 4 20 10 5 Period | follows immediately after period 6. A cashier works eight consecutive hours, starting at the beginning of one of the six periods. To determine a daily employee work sheet which satisfies the requirements with the least number of personnel formulate the problem as a linear programming problem. Q13. A city hospital has the following minimum requirements for nurses: Clock Time Minimum number of (24 hours per day) |__ Nurses required 6AM.—10A.M. 2 10A.M.~2 P.M. 1 Mathematical Methods 2.5 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in 2P.M.- 6P.M. 1s 6 P.M. — 10 P.M. 8 10 P.M.-2 AM. 20 2AM.- 6AM. 6 Nurses report to the hospital at the beginning of each period and work for 8 consecutive hours. The hospital wants to determine the minimum number of nurses to be employed so that there will be sufficient number of nurses available for each period. Formulate this as a linear Programming Problem by setting up appropriate constraint, and objective function. Do not solve. QI4. A drug manufacturer desires to obtain a production schedule to maximize the net revenue from the sale of two drugs A and B whose net revenues per unit are Rs. 60 and Rs. 40 respectively. The constraints are given below : (i) capacity to produce drugs is 1000 units of A and B together, (ii) capacity to produce containers is 1600 units of A or 800 units of B, (iii) labour is available for 800 units of A and 1600 units of B. What product mix of A and B should be produced so as to maximize net revenue ? Formulate the problem as LP model and DO NOT SOLVE. QI5. A manufacturer produces two different models X and Y of same product. The raw materials A and B are required for production. At least 18 kg of A and 12 kg of B must be used. Also at most 34 hours of labour are to be utilized. 2 kg of A are needed for each model X and 1 kg of A, for each model Y. For each model X and Y, [kg of B is required. It takes 2 hours to manufacture a model X and 1 hour to manufacture a model Y. The profit is Rs. 50 for each model X and Rs. 30 for each model Y. Formulate the above as LPP to determine how many units of each model should be produced to maximize profit. Do Not Solve Answers of Exercise 1 de Max. Z = 48x; + 40x2, Subject to constraints 2x) + X2 S$ 90, x; + 2x2 S 80, x1 + X2 $50, x1, x2 20, 2 Max. Z = 60x, + 40x2, Subject to constraints 1000x; + 1200x2 < 9000, 12x; + 8x2 < 72, x1, x2 > 0, 3. Max. Z = x; + 1.5x2, Subject to constraints X1 + 2x2 $40, 2x1 +x2< 40, $x1 + 4x2 < 40, x1, x22 05 4. Max. Z = 4000x; + 2000x2 + 5000x3, Subject to constraints 12x) + 7x2 + 9x3 < 1260, 22x) + 18x2 + 16x3 < 19008, 2x) + 4x2 + 3x; < 396, x1, X2 2 0, a Min. Z = 150x; + 200x2, Subject to constraints 6x1 + 10x22 60, 4x1 + 4x2 > 32, x1, x2 20, 9. Max. Z = 0.12x; + 0.09x> + 0.08x3 + 0.085x4 + 0.16x5 + 0.18x6, Subject to constraints Ky FX2 +X3 +X4+X5 + Xe S 50,00,000, x42 17,50,000, xs + x6 < 80,000, x3 > 10,00,000, Xs + Xp S Xi + X2, X1 SX2, X1, X2, Xs, X4, Xs, X6 = 0, Mathematical Methods 2.6 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in 10. Max. 09x) + 0.2x2 + 0.35x3 + 0.06X4, Subject to constraints X1+X2+X3+X4< 15,00,000, x4 >2,00,000, x3 < 2,25,000, x1, X2, X3, x4, 20 UW. Max. Z = 7072.5x; + 6775x2, + 5572.5x3, Subject to constraints Xi + X2 + X3 S125, 6x1 + 5x2 + 6x3 < 500, x1, X2, x3 2 0, 12, Min. Z =x, + x2 + X3 + X4+Xs + Xe, Subject to constraints Xi + X22 20, Xa + X32 14, X3 + X42 20, Xa t+Xs2 10, Xs +X625, Xi +X62>7, X1, X2, X3, X4, Xs, Xo 20, 13, Min, Z =x; + x2 +X5+X4 4X5 4X5, Subject to constraints X1+%2>7, Xo + X32 15, x3 +X4>8, X4 Xs > 20, X5 + X62 6, X)+X622, X1, X2y X3, Xt, Xs, Xo 20, 14. Max. Z= 60x1 + 40x2, X1+Xx25 1000, x)/1600 + x/800<1, x, $800, x2 5 1600, xi, x2 20, Basic Concepts 1. Graphical method to solve a LPP : To solve a linear programming problem having at most two variables we use graphical method. Note :Graphical method is not suitable for LPP having more than two variables. They are solved by using simplex method. wv Steps required to solve a linear programming problem by corner point method : (i) Write down the equations representing the given inequations. (ii) Plot the equations obtained in step (i) on the same graph. (iii) Determine the feasible region using the given inequations. (iv) Find the coordinates of the corner points of the feasible region obtained in step (ii). (v) Evaluate the objective function at each of the corner point obtained in step (iv) to determine its maximum or minimum value. 3. Unbounded Solution : When the feasible region of the given LPP is not bounded and the objective function Z may take arbitrarily large values then such type of problems are called problems having unbounded solution. 4. Multiple Optimal Solution : If the objective function Z of a LPP has optimal(maximum or minimum) solutions at more than one points then it is said to have multiple optimal solutions. Es Infeasibility : If there is no common (feasible) region between the constraints then such problem is known to have infeasible solution e.g. x + y <1; 2x + Sy > 10. Mathematical Methods 27 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in Exercise 2 QI. Maximize Z= 10x + 6y Subject to 3xtys12; 2x+5ys34, x y20 By graphic method. Q2. Solve the following LPP by graphic method : Maximize Z = 2x + Sy Subject to x+dy<04; 0 Bxty<21; 9 xt+y<9: xy20 Q3. Solve graphically : Max. Z = 50x + 30y Subject to Qxty>18; 9 x+y>12; Bx+y<34; uyed Q4. Find Graphically the minimum of : Z= 16x + 25y Subject to constraints, Qx+y27, x+y25, 2x+Sy216, x, y20 QS. Solve the following linear programming problem graphically : Maximize Z = 3x + 4y Subject to 10x+8y<80 9; -x22y-10 + yS6; KZ Q6. Solve graphically : Minimize : z= 200m + 400x2 Subject to the constraints : 1 ai+a22200, ix + 222 100, ott gH S35, ay, 20 Q7. Solve the following L.P.P. by graphic method : Minimize Z = —x; + 2x2 Subject to constraints, —x) + 3x2 < 10, x +%2 $6, Xi—x2 <2, x1, 3220 Q8. Solve the following L.P.P by graphic method : Maximize Z = 2.75x)+4.15x2 Subject to : 2x) + 2.5x2< 100, 4x) + 8x2 2 160 7.5x2 + 5x2 150, *, 220. Q9. Minimize Z = x ~ Sy + 20, subject to constraints x-y2>0, +2y>2, x>3, y<4, xy>0 Q10. Solve the following linear programming problem graphically: Maximise z = 4x + 6y subject to constraints xt+y=5, x22, ys4, xy20. QIL. Using graphic method, find the maximum value of : z = 7x + 10y Subject to x + y < 30,000, y = 12,000 x>6,000 x>y xy20 Mathematical Methods 2.8 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in Q12. In linear programming what is a ‘Feasible Solution’ and ‘Infeasible Solution’ Solve the following by graphic method and comment on the result : Min. : Z= 3x1 + 2x2 Subject to —2x1 + 3x2 $9, 3x1 — 2x. $-20, x, 20 Q13. What are “redundant constraints”? Which constraints are redundant in the following with x1, 20 4x1 + 3x $ 12, —mtme21, mtms4, nt+m<6. Q14. In linear programming what is “Multiple Solution Situation”. Solve the following graphically and interpret the result : Max. : Z = 4x + 3y Subject to 3x + 4y<24, 8x4 6y 2, x, y2 0 and solution is min z= 3latx=3,y=2, 23, Max Z = 50x + 30y, Subject to 2x + y > 18, x + y> 12, 2x + y $34, x, y > 0 and solution |, y = 34 and max Z = 1020, 24. Min. Z Wy, subject to.x + y > 200, 0.25x + 0.75y > 100, 0.10x + 0.20y < 35, x, y = 0 and solution is x= 100, y = 100 and min Z = 60,000 Mathematical Methods 21; By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in Basic Concepts 1. Duality Theory : For every LPP, there is a related unique another LPP involving the same data which also describes original problem. The given original problem is called Primal, and the related other problem is called Dual, which can be obtained by transposing the rows and columns of the primal. A solution of dual may also be obtained similar to that of primal. The two problems have very closely related properties so that optimal solution of the dual gives complete information about the optimal solution of the primal and vice versa. ve Steps For Constructing the Dual from Primal : The following steps are required for construction of a dual : (i) If the primal is a maximization problem then make dual as minimization problem and vice versa. Gi) ‘The number of variables in the dual are equal to the number of constraints in the primal and the number of constraints in the dual are equal to the number of variables in the primal. (iii) The coefficients of the objective function in the dual problem will come from the right hand side of the primal. (iv) The coefficients of each constraint in the dual will come. from the coefficients of respective variable in the primal. (v) If the i constraint in the primal is an equation then the i'® variable in the dual will be unrestricted. (vi) if the i* variable in the primal is unrestricted then the i constraint in the dual is equation. w Matrix Formulation : Any given Linear programming problem and its dual can be represented in the form of matrices. Suppose we have the following LPP problem : Maximize Z = ¢,X1 + 2X2 +C3%3 + + CpXn Subject to the linear constraints : Gy 1% + Oy2Xz + Oy3X3t...-.+Qin%y S dy 4X + Gg2Xq + z3X3t.....+AanXn LS bz QmiX1 + Am2X2 + Am3X3t-----+QmnXn S Dm ANd, X4,Xp,.20s-221-%y 20 The dual of this linear programming problem is Minimize Z = byy; + bY. + b3¥3 + + BinYrn Subject to the linear constraints : yy + Garo + Ag ¥at---- FO msn 2 Cr 4y2Vs + O22V2 + A2V3t. +4m2Ym 2 C2 Mathematical Methods 212 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in FnV1 + AanV2 + anVat-----+4mn¥m 2 Ca GND, yp Vop0+20000¥m 20 The matrix formed from the coefficients of variables in the constraints in the primal and the dual are transpose of each other. The coefficient matrix from primal is represented as A and coefficient matrix from dual is A’ both being represented as under : G1 2 413 in yy G21 31 GQ, ay a a. i 2 A. a Aa|[ 1 G2 Gs | * and A’ = |( 2 922 32 Gna Gna Ong Min Gn Gan Let us introduce the following nll vectors (matrices) : Et EE Then in matrix form the primal can be written as Max ¢’x subject to Ax 15 1, X2, 2 0; x3 unrestricted variable Q4. Write the dual to the following LPP. Max. z = 20x; + 15x2 + 18x53 + 10x4 Subject to: Mathematical Methods 213 By Dheeraj Suri, 9899-192027 x3Prime Academy, www.primeacademy.in 4x) — 3x2 + 10x3 + 4x4 5 60, Xp+X24+43=27, -a2 +443 4+ 7x42 35 Xi, Xa, X3 > 0, x4 : unrestricted in sign Q5. Find the dual of the following linear programming problem : Maximize : z = 7x1 + 8x2 + 6x3 Subject to the constraints : x1 + 4x9 + 443 = 8, 3x1 + Sx + 3x3 5 12 My 2, 4320 Q6. Write the dual of the following problem. Max. z = 4x) + 2x2 + 3x3 Subject to : ait 2x22 3, 41 ~ 3x32 6, —m +3x2- 203 53, M1, 42,4320 Q7. Find the dual of the following : Minimize Z = 5x ~ 612+ 4x3 Subject to Bm tdet6m29; 9 x t3mt+225 Tay = 2x2 x5 S10 ; x-2n+4u>4; 2x) + 5x2 — 3x5 = 31%, 1320 Q8. Consider the problem Max 2x +7y Subject to 4x+5y<20, 3x+7y<2l, x, y20 (i) Solve it by a geometric argument. (i) Write down the dual and solve it by a geometric argument. Q9. Max 3x +4y Subject to 3x + 2y <6, x+4y <4, xy20 (i) Use Graphical Method to solve this problem. (i) Replace the constraint 3x + 2y <6 by 3x + 2y <7 and find the new optimal solution also compute the shadow price of first resource. (iii) Replace the constraint x + dy <4 by x + 4y <5 and find the new optimal solution also compute the shadow price of second resource. QI0. Consider the problem Max 400x; + 500x2 Subject to 2x1 + 22 5 16, 2x1 +32 5 16, 2xi + x2 < 16, x12 20 Solve this problem graphically. (ii) If the firm could increase its capacity by 1 hour a day in just one of the three divisions, which should be the first to have its capacity increased? Answers of Exercise 2 1. Max. Z= 16y: + 12y2 Subject to Constraints yit2nsl6, nity 59 3ytyS21, ynye20 2. Min. Z = 90y1 + 60y2 + 80ys Subject to Constraints : Mathematical Methods 214 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in yi t 2y2 + 3y3 2 3, 2yi+y2ty324, 3y1 + y2 + 2y32 1, 2, ¥3 20, 3. Min. Z = 10yi ~ 15y2 Subject to the constraints : 23, yity24, 3y1 — 2ya 4. Min. Z = 60y; + 27y2 + 35y3 Subject to Constraints : dy; + y2—ys > 20, —3y, ty 215, 10y) + yr + 4y5> 18, dy) + Ty i ‘Yi, ¥3 2 0, y2 is unrestricted in sign, a Min. Z* = 8y; + 12y2 Subject to vit 5y2>8, 4y1 +3y2>6, yi unrestricted in sign and y> > 0, 6. Min. Z = 3y1 + 6y2 —3ys, subject to Yu y2 00, yitys<4, yi + Yo— 3y3 $2, —3y2 + 2y3 $3, yaya? 0 7. Max. Z = 9y) + Sy2— 10ys + 4y4 + 3ys Subject to 3y1 + y2—Ty3 + ya + 2ys SS; 6y; + 2y2 + ys + 4y4 — 3ys <4: Basic Concepts 1. Suppose we have the following LPP problem : Maximize Z = 6x, + C2X2 + €3X3 + + CnXn Subject to the linear constraints : Qy1X1 + Ay2X2 + Ay3X3+. 24%, + Az2xX2 + fasts Xt + Ay2Xz + Onset and, x1,X2, Xp 0 The dual of this linear programming problem is Minimize Z = byy; + bpy2 + b3y3 +--+ Bm Subject to the linear constraints : Qi + Aaa + Agi Vat. Qy2V1 + Az2V2 + Az2Vat- +Om1¥m 2 C1 -+Om2¥m 2 Cz AnV1 + AanV2 + AsnVst- ANA, V1) Vay--0-+01Im 20 If (41, x2, ..., 4a) is feasible in the primal problem and (y4, y2,-- feasible in the dual problem, then byy1 + bzy2+- «+dmYm 2 CX, + C2X2+-. Mathematical Methods 215 By Dheeraj Suri, 9899-192027 Cn ot nXnPrime Academy, www.primeacademy.in So, the dual criterion function has a value that is always at least as large as that of the primal. 2. The Duality Theorem : Suppose the primal problem has a finite optimal solution. Then the dual problem also has a finite optimal solution and the corresponding values of the criterion functions are equal. If the primal has no bounded optimum, then the dual has no feasible solution. Ql. Consider the problem Max 2x + Ty subject to ; 2 F ” 4 (a) Solve it by geometric argument (b) Write down the dual and solve it by geometric argument, (©) _ Are the values of the criterion functions equal’? @2. To feed his stock a farmer can purchase two kinds of feed, The farmer has determined that the herd requires 60, 84, and 72 units of the nutritional elements A, B and C respectively per day. The contents and cost of a kilogram of each of the x>0y>0 two feeds are given in the following table : [Eco. (H) 2022] Nutritional Elements Cost units per kg) (Rs per kg) | A B Cc Feed 1 3 7 3 100 Feed2 2 2 6 40 (i) The farmer wants to determine the least expensive way of providing an adequate diet by combining the two feeds. Set this up as a linear programming problem and find the minimal-cost diet. Gi) “Does the optimal solution change if the price of Feed 1 increases from 100 Rs. per kg to 140 Rs. per kg, with all other data unchanged? Q3.(i)Solve the following problem : Max 3x + 4y subject to nreere x20,y20 (ii) Compute the increase in the criterion function if the first constraint changes to 3x+2y<7, ii) Compute the increase in the criterion function if the second constraint changes to x+dyss, (iv) prove using (ii) and (ii) that if (x, y) is feasible in the original problem then the criterion function can never be larger than the optimal value of the criterion function obtained in (i). (Eco. (H) 2022] Mathematical Methods 216 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in For Full Course Video Lectures of ALL Subjects of Eco (Hons), B Com (H), BBE, MA Economics, NTA UGC NET Economics, Indian Economic Service (IES) Register yourself at www.primeacademy.in Dheeraj Suri Classes Prime Academy +91 9899192027 Mathematical Methods 2.17 By : Dheeraj Suri, 9899-192027Chapter 3 Integration earning O! After learning this chapter you will understand : Indefinite Integration. Definite Integrals. Definite Integrals. Properties of Definite Integrals. Newton Leibnitz Integral. Area Under the Curve. Finding Cost Function From Marginal Cost. Finding Revenue Function From Marginal Revenue. VVVVVVVV For Full Course Video Lectures of ALL Subjects of Eco (Hons), B Com (H), BBE, MA Economics, NTA UGC NET Economics, Indian Economic Service (IES) Register yourself at www.primeacademy.in Dheeraj Suri Classes Prime Academy +91 9899192027Prime Academy, www.primeacademy.in Basic Concepts 1. Integration : The process of finding f(x) when f(x) is given is called Integration. ie., The process inverse to differentiation is integration. So, Integration is anti- derivative. Symbolically, J f@dde = F(x), such that © ey = F(x) dx Here, J is the symbol of integration, fix) is the integrand, x is the variable of integration, dx denotes that the integration is performed with respect to x. F(x) is the integral or primitive of fix), So, | f (x)dx means integral of f(x) with respect to x. Note : The function to be integrated is called the integrand. ONete : The derivative of a function is unique but a function may have infinite integrals or anti- derivatives. 2. Constant of integration : As the differential coefficient of a constant function is zero, thus, if “. F(x) = f(x) then “FO += FO * [fQdde= FQ)t+e Here, ¢ is called the constant of integration and can take any value. Mote : | f (x)dx is called the indefinite integral, because by giving different values tothe constant of integration the indefinite nature is preserved. Note : Always remember to add c after integration in questions of indefinite integration. 3. Fundamental rules of Integration : Theorem - 1 If K is a constant then 1 = [kf (x)dx= kj fae Theorem - I 1={[f@)+gQ)] de =| f@)det J g@dde Mote: {rodr]= so) Mathematical Methods 3. By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in 4. Standard Formulae : @ fxtdv=*Steyne-1 Gi) fxdx=Ste (iii) fdx=xte (iv) f0dx=c ) Stax = log|x| +c _ (aeeapyr 2 (vi) f(ax + b)"dx = ey to Vint 1 (vii) fe*dx=e* +c (viii) fa*dx = aa c (ix) fem™dx= +e wo Jamar = +c 5. _ Integration by inspection : To search the requisite function for finding an anti- derivative is known as integration by method of inspection. Example I : Integrate : f (x*/* — x?/3 + 3x?) dx Sample Answer :1= f (x1/4 — x2/3 4 3x4/2)dx 2 1 gu jin dn ng amet aR tite [e Jxtdx ==> +c] aod ae 48 38.) 3 ap -F4+3¥+e sixh-iiedi+e Vote : In Questions of integration involving rational expressions, if the degree of the numerator is greater than or equal to, that of the denominator, then, first of all, divide the expression using long division method. Exercise 1 Integrate the following : Qi. fx'dx @ Jvrde Q3. faeax 4 Ie ae? ex )dx OS. fozar Q6. fxvxdx Qa. Sf xvxvxdx as. f ax Q9. Integrate the following functions : [Eco. (H) II Sem. 2014] J2xe-2)°dx QU0. fate'dx QU. fete +e + ede qi, jae Qu. Vx+atvx+b Qu. dx Qus. f Vxtl+Vx+2 x+1+V2x+2 ais, p78*2 4 air. plo% ay ais. pe +4 3x+5 l+x x+3 Mathematical Methods 3,3 By : Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in -2)2 xt me Quis. jo dy 0. fax Qi. S Fax Q22. Solve the following initial value problems : (a) Find FQ) if P(@) = % - 2x and F(Q) = %. (b) Find F(x) if P(x) = x(1 — 2°) and F(1) = 5/12. Q23. Suppose that f’ (x) =2 for all x, and (0) = 2, f/(0)=1. First find f’(x) and then £O). Q24. Suppose that f"(x) =-4+2x3 +2 for x > 0, and fl) = 0, f/(1) = 1/4. First find f(x). Answers of Exercise 1 LZ 4e, 2» 2x? +c, 3. Axe, A Bx8 42x82 $2285 +, 5 -or S40, 6. 7 3x40, 8B plog|2x+U +a te, 9. +e, EC, ue +a tc a2. x+b)P? +. 13, —(2(¢+3)°? +204 8) 4C, Me 3 (et2)? 4 (xt? +, 15. —(L2x41)*? 12x 42))+C, 16. 2x=log|3x+5|+C, 17. 2log|1+x|-x+C, 18. ~3x+4log|x+3/+C. 21. 2log|1+x|—-x+C, Basic Concepts 1 Integration by Substitution : Integration by substitution is a technique used to evaluate definite and indefinite integrals. It involves substituting a new variable in place of an existing expression within the integral, making the integration process simpler and more manageable. Some functions can be Integrated by changing their independent variables. Substitution can be used in the following cases : @ SE Gd SCOP ead Gi Felfoo]s/ Cae (i) Integrals of type f i io :Here putfix)=1 so f!(x)dv = dt. jp rene _ 5 ae “Ter Now, this can be solved by inspection. Gi) Integrals of type f [f(x)]". f/(e)dx + Here put flx)=1 sof’ (x)dx = dt- . SFG" f/Godx = fe" dt Now, this can be solved by inspection. Gi) Integrals of type J g[f(x)].f/ (ad : Here put fix) =1 so f!(x)dx = dt. * DglfOoL sd = J gat Now, this can be solved by inspection. Mathematical Methods 3.4 By : Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in Exercise 2 nae the following : & orl — q. fia @. ae @. Qa. je S. Say ea Q6. qa. f = Qs. f (2x - 1 —3)92dx 9. fxt2(14x5)Fax Quo. f (1 one QU. fx +x2)5 dx QI2, Verify that Gn an interval where ax +b > 0) SS wee = (ax — 2b)Vax+b+C QI3. Show that Slax +byPdx = Q14. Show that SxVax +Bax = 4; (3ax — 2b)(ax + b)*/? +C Answers of Exercise 2 slog Je +1] +c, log | log(log x)| +c. Tey ae + DPC, (a40,p4 1) logleX+x| +c, logle* +e] +c, 2log|Vx +1) +c, 2log|Vx+1| +c. 2log |vx-1| +c, S@- 348 +23) +0, sae -£a + x5/2)5/2 +a easyer +e 10. el") +0, eae er eae Basic Concepts Special Integrals : 3. 5. logix-+ Ve -a 7 8. 9. Mathematical Methods 3.5 By : Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in Trick #1 : Integrals of type [ pe dx, where P(x) and Q(x) are linear functions. ; eral ax f PO in finer . on Write the integral as f eer dx, ie.,in Teraarans 1 form and then integrate it. Exercise 3 dx ax ex a. Jae @ j_¢ 3. famax 9x7 =1 ax ax ax. OO Sam 0. S ame 6 Saar dx ax. ax QQ. Jaa 08. Sam ®. Sau Qio. Qu. fas Answers of Exercise 2 1), (3x2 2 tog FSA] +e, 4. log|x + V44x2| +0, =log|2-x)+VG=xF Fil 4e, 7. tan (HA) +0, 9. log f= +vx2 4x4 1| +c, 2 1 3. 5. Flog|4x + VI6x? +25] +c, 6, 8. . 10. log|x—1+Vx®—2x+4| +c, UL. log|x +2 4+-Vx*+4x+2| +0, Basic Concepts 1. Integration By Parts : Integration by parts is useful in questions involving product of algebraic and transcendental functions. e.g., 1= J f@).g(x)dx = f@0.f @edx - J [LO f g@arax Meta; Integral of product of two functions = First function x {Second function - /[Differentiation of first function x /Second function] Itis essential here to determine the first & second function & the following rule will help, not always but often, in determining the I & II functions I Inverse Trigonometric Function, e.g., sin x, cos x etc L__ Logarithmic Function, log x A Algebraic Function, ¢.g., Polynomial functions, T Trigonometric Function, e.g., sin x, cos x etc. E Exponential Function, e.g., e*, a" etc. consider that function as First which comes First in ILATE. Mathematical Methods 3.6 By Dheeraj Suri, 9899-192027