ECON009: Advanced Mathematical Methods for Economics
Problem Set 5 (Linear Programming)
Instructor: Mr. Rohit
Question 1: A carpenter makes tables and chairs. Each table can be sold for a profit of Rs. 300 and
each chair for a profit of Rs. 100. The carpenter can afford to spend up to 40 hours per week
working and takes six hours to make a table and three hours to make a chair. Customer demand
requires that he makes at least three times as many chairs as tables. Tables take up three times as
much storage space as chairs and the storage space is available for at most four tables. Formulate
this problem as a linear programming problem and solve it graphically.
Question 2:- Suppose that the following constraints have been provided for a linear programming
model.
−x1 + 2x 2 ≤ 50
−2x1 + x 2 ≤ 50
x1 ≥ 0
x2 ≥ 0
(a) Demonstrate that the feasible region is unbounded.
(b) If the objective is to maximize z = − x1 + x 2, does the model have an optimal solution? If so,
find it. If not, explain why not.
(c) Repeat part (b) when the objective is to maximize x1 − x 2.
(d) For objective functions where this linear programming model has no optimal solution, does
this mean that there are no good solutions according to the model? Explain. What probably
went wrong when formulating the model?
Question 3: Write the dual of the following Problem
{ x3 ≤ 6
2x1 + x 2 ≤ 4
max x1 + x 2 + x3 subject to
What are the solutions to this problem and the dual?
Question 4: Partnership in friends’ venture
This is your lucky day. You have just won a Rs 1 crore prize. You are setting aside 30 Lakhs for
taxes (because of the 30% tax on lottery prizes) and 10 lakhs for personal expenses. You also have
decided to invest the other Rs 60 lakhs. Upon hearing this news, two different friends have offered
you an opportunity to become a partner in two different entrepreneurial ventures, one planned by
each friend. In both cases, this investment would involve expending some of your time next
summer as well as putting up cash. Becoming a full partner in the first friend’s venture would
require an investment of Rs 50 lakhs and 400 hours, and your estimated profit (ignoring the value of
ECON009: Advanced Mathematical Methods for Economics
Problem Set 5 (Linear Programming)
your time) would be Rs 45 lakhs. The corresponding figures for the second friend’s venture are Rs
40 lakhs and 500 hours, with an estimated profit to you of Rs 45 lakhs. However, both friends are
flexible and would allow you to come in at any fraction of a full partnership you would like. If you
choose a fraction of a full partnership, all the above figures given for a full partnership (money
investment, time investment, and your profit) would be multiplied by this same fraction.
Because you were looking for an interesting summer job anyway (maximum of 600 hours), you
have decided to participate in one or both friends’ ventures in whichever combination would
maximize your total estimated profit. You now need to solve the problem of finding the best
combination.
a) Formulate a linear programming model for this problem.
b) Use the graphical method to solve this model. What is your total estimated profit?
