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Primal
We are starting a business selling two FORE insignia products: Sweaters and Scarves. Profits on each are Rs. 35 and Rs. 10 respectively. Each has a pre-bought embroidered crest sewn on it; We have 2000 crests in hand. Sweaters take four skeins of yarn, while scarves only take one, and there are 2300 skeins of yarn available. Finally, we have available storage space for 1250 scarves; we could use any of that space for sweaters, too, but sweaters take up half again as much space as scarves. What product mix maximizes revenue?
Yarn 1 4
Storage 2 3
subject to
x + y 2000 4x + y 2300 (Crest Constraint) (Yarn Constraint)
3x + 2y 2500
x; y 0
(Storage Constraint)
(Non Negative Constraint)
Graphical Solution
z(575; 0) = 20125
z(0; 1250) = 12500 z*(420; 620) = 20900
Initial Table
Cj B.V S1 S2 S3 Cj-Zj CB 0 0 0 35 X 1 4 3 35 10 Y 1 1 2 10 0 S1 1 0 0 0 0 S2 0 1 0 0 0 S3 0 0 1 0 SOLUTION 2000 2300 2500 RATIO 2000 575 833.33
st 1
Iteration
Cj 35 X 0 1 0 0 10 Y 3/4 1/4 5/4 5/4 0 S1 1 0 0 0 0 S2 -1/4 - -35/4 0 S3 0 0 1 0 SOLUTION 1425 575 775 RATIO 1900 2300 1380
B.V S1 x S3 Cj-Zj
CB 0 35 0
Optimal Solution
Cj B.V S1 X Y Cj-Zj CB 0 35 10 35 X 0 1 0 0 10 Y 0 0 1 0 0 S1 1 0 0 0 0 S2 1/5 2/5 -3/5 -8 0 S3 -3/5 -1/5 4/5 -1 SOLUTION 960 420 620
What if...?
one additional crest patch one additional skein of yarn one additional unit of storage space
Z=35*(0)+10*(0)=0
Additional Crest
Z=35*(0.4)+10*(-0.6)=8
Additional Yarn
Z=35*(-0.2)+10*(0.8)=1
Additional Storage
Shadow Price
In a linear programming problem in standard form, Shadow Price is the amount by which the optimal value of the objective function is improved (so that it increases the z value for a maximization problem and decreases the z value for a minimization problem) if the right hand side of constraint is increased by one unit and all other constraints remaining constant.
Z=35*(0)+10*(0)=0
Z=35*(0.4)+10*(-0.6)=8
Z=35*(-0.2)+10*(0.8)=1
Dual
Suppose an entrepreneur wants to buy our business's resources. What prices should be quoted for each crest? skein of yarn? Unit of storage? Suppose the entrepreneur quotes p for each crest patch, q for each skein of yarn, and r for each storage unit. Each sweater takes one patch, 4 skeins, and 3 storage units, so effectively p + 4q + 3r is bid per sweater. Likewise, p + q + 2r is bid per scarf.
Scarf Sweater
Crest
1 1
Yarn
1 4
Storage
2 3
Min z1 = 2000p + 2300q + 2500r subject to p + 4q + 3r 35 p + q + 2r 10 p, q, r 0 Where p= price of each crest q= price of each yarn r= price of unit storage space
Initial Table
Cj B.V A1 A2 CB M M
2000 p 1 1 20002M
2300 q 4 1 23002M
2500 r 3 2 25002M
0 S1 -1 0
0 S2 0 -1
M A1 1 0
M A2 0 1 SOLUTION 35 10 RATIO 35 10
Cj-Zj
Optimal Solution
2300 q 1 0 0
2500 r 0 1 0
Economic Interpretation
The values corresponding to p , q , r in the optimal table show the shadow prices i.e. the price that will be incurred when we use one more unit of crest, yarn and storage, respectively. If we employ one more unit of yarn, for example, the cost of using that one extra unit will be Rs. 8. This price is known as the Shadow Price.
This shadow price computed from the dual is same as the value of slack variables calculated from the optimal table of the primal
Thus, shadow prices are the solutions to the dual problem. Also, the payoff is the same in both the primal problem and the dual problem
If at the optimal solution of the primal problem a primal constraint has a positive value of a slack variable the corresponding resource is not completely used up and must have a Zero Opportunity Cost. But if the value of slack variable is Zero in that constraint the entire resource is being used up and must have a positive opportunity cost. Therefore mathematical condition is
Primal Slack Variable x Dual Variable = 0
Thank You
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