LESSON ONE: MATRIX ALGEBRA

1.0 Introduction

This lesson covers matrix algebra, the definition, matrix operations, determinants, inverse
and finally its application in making business decisions.

1.1 Expected Learning Outcomes

By the end of the lessson, the learner should able to:

• Describe the different types of matrices
• Perform various operations on matrices
• Solve simultaneous equations using matrix approach.
• Apply matrices to input-output problems

1.2 Definition of a Matrix

A matrix is a rectangular (or square) array of numbers in rows and columns. Every matrix is
characterized by:-
➢ Order or dimension: It is defined by the number of rows (m) and number of columns (n) and
denoted (m*n) and read as m by n.
 ➢ Membership: Matrices are denoted by capital letters while their members / elements are
designated by subscripted lower case letters of the alphabet. The first subscript refers to the
row to which the element belongs while the second the column.

 a11 a12 . ... ain 

 
 a 21 a 22 .... . a 2 n 
A=  . . . . . 
 
 . . . . . 
a a m 2 . . a mn 
 m1

1.3 Types of matrices

The following are the different types of matrices:-

(a) Null matrix : It is a matrix whose all elements are equal to zero.
0 0 0 
e.g. A( 2*3) =  
0 0 0 
(b) Rectangular matrix: A matrix in which the number of rows is not equal to the number of columns
( m  n)

1 2 3
e.g. A =  
 4 5 6
i. Row matrix: It is a rectangular matrix with one row and more than one columns
(m = 1 and n  1) e.g. B = 7 2 5 9

ii. Column matrix: It is a rectangular matrix with one matrix and more than one rows
 2
(n = 1 and m  1) e.g. 4
6

(c) Square matrix: A matrix in which the number of rows is equal to the number of columns (m = n)
(d) Transpose matrix: It is a matrix derived by interchanging the rows(Columns) with the columns
(rows).

2
 1 4 
1 2 3
A=  The transpose of A is A' = 2 5
 4 5 6 3 6

(e) Identity Matrix (unit matrix): It is a square matrix having all the elements of the leading diagonal
(that diagonal running from top left to bottom right) being equal to one, while the others are
1 0 0
1 0
predominantly equal to zero i.e. I =   , I = 0 1 0
0 1  0 0 1

(f) Diagonal matrix: It’s a square matrix having all its elements being equal to zero except the main
5 0 0 
diagonal consisting of numbers other than one e.g. C = 0 2 0
0 0 7 

(g) Scalar matrix: It is a diagonal matrix whose all diagonal elements are equal
5 0 0 
e.g. D = 0 5 0
0 0 5

(h) Symmetric matrix: it is a square matrix whose elements above the main diagonal are mirror
images of the elements below the main diagonal e.g.
2 5 6
1 2 
E=  , F = 5 3 7 
 2 3 6 7 4

(i) Sub-matrix: It is a matrix derived by deleting some rows and / or columns from a matrix.
2 5 6 
9 10
G = 0 9 10 H = 
7 4 
H is a sub-matrix of G
3 7 4  

1.4 Matrix Operations

1.4.1 Matrix addition and subtraction
Two or more matrices may be added / subtracted if they are of the same order, corresponding
elements being added / subtracted. Elements correspond in two or more matrices if and only if they

3
occupy the same position as defined by the row and column that define their positions. The order
of the sum / difference between two or more matrices is equal to the order of the two or more
matrices being added / subtracted.

Example
1 3   − 3 2
Given that A =   B =  
 4 − 2  0 4
Find (a) A+B (b) B – A

Solution
 1 3   − 3 2  1 + −3 3 + 2   − 2 5 
A+B =   +   =   =  
 4 − 2  0 4  4 + 0 − 2 + 4  4 2

− 3 −1 2 − 3  − 4 − 1
B-A =   =  
 0 − 4 4 − (−2)  − 4 6 

1.4.2 Matrix Multiplication

Given two matrices, A( m1*n1) and B( m 2*n 2 ) , then A(m1*n1) * B(m 2*n 2 ) = C (m1*n 2 ) . A( m1*n1) is called a pre-

multiplier and B( m 2*n 2 ) is called a post multiplier. Two matrices may be multiplied if the number

of columns in the pre-multiplier is equal to the number of rows in the post multiplier with the
product having an order defined by the rows in the pre-multiplier and the columns of the post
multipliers
Example
6 2 
 2 6 1 − 2  2 1 7 
Given that A =   , B=  ,C =   , D = 1 3
 3 5 7 2  3 4 5 5 8 

Find : (a) AB (b) BC (c) CD

Solution

4
 2 6 1 − 2 (2 * 1) + (6 * 7) (2 * −2) + (6 * −2) 44 − 14
(a) AB =   = = 4 
3 5 7 2   (3 * 1) + (5 * 7) (3 * −2) + (5 * 2)  38

1 − 2 2 1 7  − 4 − 7 − 3
(b) BC =   = 
7 2  3 4 5  20 15 59 

6 2 
2 1 7    =  48 63
(c) CD =   1 3   
3 4 5 5 8  47 58
 

1.4.3 Inverse of a matrix

Any matrix A has another matrix A-1 derived from it such that A * A −1 = I where I is an identity
matrix. Both matrices A and A-1 are square matrices of the same order.

Procedure for finding an inverse

i. Find the cofactor matrix template which is a matrix of signs obtained by raising -1 to the power
of the sum of the row and column position e.g.
 − 11+1 − 11+ 2  + − 
 2+1 = 
− 1 − 12+ 2  − + 

ii. Find the cofactor matrix. A cofactor of an element aij is the product of the minor of aij and

−1i+ j
iii. Find the determinant
iv. Find the adjoint matrix which is the transpose of the cofactor matrix
1
v. Find the inverse i.e. Inverse = * Adjo int
Determinant

Example
Find the inverse of the following matrices
 2 5
(a) A =  
1 6 

5
 6 5 3
(b) B = 8 4 5
7 6 3

Solution
 2 5
(a) A =  
1 6 
The cofactor matrix template is given by
+ − 
− + 
 
The cofactor matrix
+ 6 − 1 
 − 5 + 2
 
The determinant is (2 * 6) − (−5 * −1) = 7

1  6 − 1
Inverse =
7 − 5 2 

6 5 3
(b) B = 8 4 5
7 6 3

Finding the cofactors of the coefficient matrix:

 4 5 8 5 8 4
 − + 
 6 3 7 3 7 6
− 18 11 20 
 5 5 
− 3 − 1 
3 6 3 6
− 6 3
+
7 3
−
7 6 = 3
  13 − 6 − 16
 5 3 6 3 6 5 
+ 4 − +
4 
 5 8 5 8

The determinant = (6 * −18) + (5 * 15) + (3 * 20) = 7

− 18 3 13 
The inverse = 1  11 − 3 − 6 

7
 20 − 1 − 16

6
 Example
The national office of a car rental company is planning its maintenance for the next year. The
company’s management is interested in determining the company’s needs for certain repair parts.
The company rents saloon cars, station wagons and double cab pick ups. The matrix as shown
below indicates the number of each type of vehicle available for renting in the four regions of the
country:-
Saloon Station wagons Double cabs Region
150 300 400 Coast
110 200 300 Central
90 100 100 Western
120 300 200 Eastern
Four repair parts of particular interest, because of their cost and frequency of replacement are
fan belts, plugs, batteries and tyres. On the basis of studies of maintenance records in different
parts of the country, the management have determined the average number of repair parts needed
per car during a year. These are summarized below
Station wagons Double cabs

Saloons
17 16 15 Fan belts
12 8 5 Plugs
9 7 5 Batteries
4 7 6 Tyres
Required:-
i. The total demand for each type of car
ii. The total number of each repair part required for the fleet
iii. The total cost for all repair parts

Solution

(a) (i) Total demand for each type of car

7
 saloon central Western Eastern
Saloon 150  110   90  120   470 
Station Wagons 300  + 200 + 100 + 300  =  900 
         
Double Cabs 400 300  100 200 1000

(ii) The total number of each repair part required for the fleet

fan belts 17 16 15 37,390 Fan Belts

12 8 5   470  17,840  Plugs
Plugs    900  =  
Batteries  9 7 5   15,530  Batteries
  1000  
Tyres 4 7 6 14,180  Tyres

(iii) The total cost for all repair parts

37,390
17,840 
1250 800 6500 8000  = 275,394,500
15,530 
 
14,180 

1.5 Solution of Simultaneous Equations

Procedure
i. Model the simultaneous equation as a matrix
ii. Find the inverse of the coefficient matrix
iii. Pre-multiply the inverse on both sides of the equation
iv. Solve for the unknowns

Example
A movie theatre charges Sh. 80 for each adult admission and Sh. 50 for each child. One Saturday,
525 tickets were sold, bringing in a total of 32,550. How many of each type of ticket were sold?
(Use the matrix method)

Solution

8
Let x and y denote the number of the adult and children tickets sold respectively
The set of equations will be
x + y = 525
80 x + 50 y = 32550
Rewriting in matrix form
 1 1   x   525 
80 50  y  = 32550
    
The cofactor matrix is given by
 50 − 1
− 80 1 
 
The determinant is (50 * 1) − (−80 * −1) = −30

1  50 − 1
The inverse is −
30 − 80 1 
Pre-multiplying the inverse on the right hand side we have:-
 x 1  50 − 1  525  210
 y  = − 30 − 80 1  32550 = 315
      

Therefore the number of tickets that must be bought is 210 and 315 for adults and children
respectively

Example
A firm manufactures three types of pans; round bottom, square bottom and triangular bottom.
These products use three available inputs from material; man hour and machine hour as shown in
the table below:

Inputs Per unit utilization of inputs Availability

Round Square Triangular
bottom bottom bottom
Raw material 6 5 3 110
Man-hour 8 4 5 130

9
 Machine hour 7 6 3 125
Using the matrix method, determine the number of units of each product to produce in order to
utilize completely the available resources.

Solution
Let x, y and z denote units of the round bottom, square bottom and triangular bottom pans
respectively.
6 x + 5 y + 3 z = 110
8 x + 4 y + 5 z = 130
7 x + 6 y + 3 z = 125
Re-writing the equations in matrix form:
6 5 3  x  110
8 4 5  y  = 130
    
7 6 3  z  125

Finding the cofactors of the coefficient matrix:

 4 5 8 5 8 4
 − + 
 6 3 7 3 7 6
− 18 11 20 
 5 5 
− 3 − 1 
3 6 3 6
− 6 3
+
7 3
−
7 6 = 3
  13 − 6 − 16
 5 3 6 3 6 5 
+ 4 − +
4 
 5 8 5 8

The determinant = (6 * −18) + (5 * 15) + (3 * 20) = 7

− 18 3 13 
The inverse = 1  11 − 3 − 6 

7
 20 − 1 − 16

 x − 18 3 13   5 
Therefore  y  = 1  11 − 3 − 6  = 10
  
7
 z   20 − 1 − 16 10

Therefore, the numbers of units of each product to produce in order to utilize completely the
available resources are 5, 10 and 10 units of the round bottom, square bottom and triangular bottom
pans respectively.

10
1.6 Input Output Analysis
Input output analysis is used to analyze the interdependence of various segments of an economy.
According to the technique, an economy is divided into two broad sectors, the sources or producers
sector and the destinations or inputs or users’ sectors.
The producers’ sectors includes:-
➢ The section that manufactures goods
➢ The section that provides services
These goods and services are intended for:-
➢ Industrial usage and are called industrial goods and services
➢ Final consumption and these are termed consumer goods and services
The output of each industry from each industry is either for industrial use or for final consumption.
The model aims at indicating how products produced from different sectors of the economy are
consumed by the industrial sector and the final consumption sector. It indicates how the
independent sectors of economy interact. The interaction of these sectors is necessary information
for planning purposes so as adequate stock of goods can be produced by the economy. A device
to assist in such planning is the technical coefficients.

1.7 Assumptions of input – output models

➢ All inputs into an economy emerges as outputs i.e. input equals output
➢ Industries / sectors interdependently or interactively produce outputs with sectoral output
acting as inputs into the same or other sectors.

1.8 Types of input –output models

Input output models are of two types: Closed and open models. Closed models are those where
all that is produced by an industry / sector is consumed by sectors interacting in the output
production process. Open models are those in which some of the production is consumed by those
who produce it and the rest of the production is consumed by external bodies.

1.9 Purpose of input output analysis

➢ Planning for economic development of a region or state
➢ Shows how resources in an economy are shared among contributing sectors

11
 ➢ Helps in determination of GDP
➢ Reveals impact of decision made by the contributing sectors on the economy

Input output equations

Consider a two sector economy with total outputs of X 1 and X2 respectively. The total output
equations will be given by
a11 X 1 + a12 X 2 + d1 = X 1
a 21 X 1 + a 22 X 2 + d 2 = X 2
Rewriting in matrix form, we have
 a11 a12   X 1   d1   X 1 
a + =
 21 a 22   X 2  d 2   X 2 

a a12  d  X 
Let A =  11  D =  1 X =  1
a 21 a 22  d 2  X 2 
Therefore,

AX + D = X
D = X − AX
D = X I − A

= I − A D
D −1
X =
I − A
Where X= Total output, A = Technical coefficient matrix ,
I − A−1 = Leontiff inverse

Example 1
Given the Input-output table below: -
P Q Final demand Total
P 60 140 300 500
Q 110 90 150 350
(a) Find the Technical Coefficient Matrix.
(b) Determine the Total Output given that the final demand for output from industry P
increased by 10% while that from Q went down by 5%.

12
Solution
(a) The technical coefficient matrix will be given by:-
 60 140 
 350  = 0.12 0.4 
A =  500
110 90  0.22 0.26
 
 500 350 
(b)
1 0 0.12 0.4   0.88 − 0.4
I −A= − = 
0 1 0.22 0.26 − 0.22 0.74 
Determinant = (0.88 * 0.74) - (-0.22 * -0.4) = 0.5632
Evaluating the changes in the final demand , we have
P = 1.1 * 300 = 330
Q = 0.95 * 150 = 142.5

X = I − A D
−1

1 0.74 0.4   330   534.8 

X = =
0.5632 0.22 0.88 142.5 351.5625

Example 2

An economy consists of three industries X, Y and Z and each produces one product. The interaction
of the use of X, Y and Z production over some fixed period of time is as shown below:
X Y Z Final Total
demand production
X 100 40 80 140 360
Y 40 60 40 180 320
Z 60 40 40 100 240
Suppose demand is expected to increase by 30% for X and Y and reduce by the same
percentage for Z industries. What must the total output be to meet this projected demand?

Solution
The technical coefficient matrix is;-

13
100 40 80 
 360 320 240  0.28 0.13 0.33
 40 60 40  =  0.11 0.19 0.17 
 60 360 320 240 
 360 40 320 40 240 0.17 0.13 0.17 

1 0 0 0.28 0.13 0.33  0.72 − 0.13 − 0.33

I − A = 0 1 0 −  0.11 0.19 0.17  =  − 0.11 0.81 − 0.17 
0 0 1 0.17 0.13 0.17  − 0.17 − 0.13 0.83 

 0.18 − 0.17 − 0.11 − 0.17 − 0.11 0.81 

+ − + =
 − 0.13 0.83 − 0.17 0.83 − 0.17 − 0.13 
0.6502 0.1202 0.152 
 − 0.13 − 0.33 − 0.33 − 0.72 − 0.13  
= 0.1508 0.5415 0.1157 
0.72
− − 0.13 0.83
+
− 0.17 0.83
−
− 0.17 
− 0.13 
 0.2894 0.1157 0.5689
 − 0.13 − 0.33 0.72 − 0.33 0.72 − 0.13  
+ − 0.17
−
− 0.11 − 0.17
+
− 0.11 0.81 
 0.81

The determinant is = (0.72 * 0.6502) + (0.1202 * −0.13) + (0.152 * 0.33) = 0.402358

0.6502 0.1508 0.2894

The inverse is 1 0.1202 0.5415 0.1157
0.402358  
 0.152 0.1157 0.5689

The new values of the new demand are:

X = 1.3 * 140 = 182
Y = 1.3 * 180 = 234
Z = 0.7 * 100 = 70

The total output will be:

0.6502 0.1508 0.2894 182  432.17 
1 0.1202 0.5415 0.1157  234 = 389.43
0.402358     
 0.152 0.1157 0.5689  70   234.73

14
1.10 Activities

1. An investor has Sh. 20,000 to invest. If part is invested at 8% and the rest at 12%, how much
should be invested at each rate to yield 11% on the total amount invested? (Use the matrix
method)
2. A company produces three products P, Q and R using raw materials A, B and C. One unit of
P requires 1, 2 and 3 units of A, B and C respectively. One unit of Q requires 2, 3 and 2 units
of A, B and C respectively. One unit of R requires1, 2 and 2 units of A, B and C respectively.
The number of units available for raw material A, B and C are 8, 14 and 13 units respectively.
Using the matrix method, find how many units of each product to poduce in order to utilize
completely the available resources.
3. A sales man has the following record of sales during three months for three items A, B and C
which have different rates of commission
Months Sales in units Total
A B C commission
(KSh.)
January 90 100 20 800
February 130 50 40 900
March 60 100 30 850
Using the matrix method, find out the rates of commission in Sh. on items A, B and C.
4. Food Perfect Corporation manufactures three models of the Perfect Food processors X, Y and
Z. Each model of X processor requires 30, 40 and 30 minutes of electrical assembly,
mechanical assembly and testing respectively. Each model of Y requires 20, 50 and 30
minutes of electrical assembly, mechanical assembly and testing respectively. Each model of
Z requires 30, 30 and 20 minutes of electrical assembly, mechanical assembly and testing
respectively. If 2500 minutes of electrical assembly, 3500 minutes of mechanical assembly
and 2400 minutes of testing are used in one day, how many of each model will be
produced?(Use the matrix method)
15
5. A citrus company completes the preparation of its products by cleaning, filling and labeling
bottles. Each case of orange juice requires 10, 4 and 2 minutes in the cleaning, filling and
labeling machine respectively. Each case of mango juice requires 12, 4 and 1 minute in the
cleaning, filling and labeling machine respectively. Each case of pineapple juice requires 9, 6
and 1 minute in the cleaning, filling and labeling machine respectively. If the company runs
the cleaning machine for 398 minutes, the filling machine for 164 minutes and the labeling
machine for 58 minutes, how many cases of each type of juice are prepared? (Use the matrix
method)

6. The following is the input-output table for three industries X1, X2 and X3.

Users
X1 X2 X3 F Total Output
Producers X1 8 10 10 4 32
X2 8 20 6 6 40
X3 8 10 10 2 30
Required:
i. Determine the technology matrix.
ii. If the final demand for the outputs of industries X 1, X2 and X3 becomes 6, 4 and 6
respectively, find the outputs required of the industries.
7. An economy consists of three industries R, S and T. the interrelationships between the
production of this industries is as shown below. Units in “000” tonnes.

R S T Consumer Total
R 50 20 40 70 180
S 20 30 20 90 160
T 30 20 20 50 120

Required:
i. Determine the Input-output matrix.

16
 ii. If the demand is expected to change for R, S and T and it becomes 60, 110 and 60
respectively. What must the total output be for each industry to satisfy this demand?

8. Consider a hypothetical economy consisting of three sectors A, B and C with inputs and
outputs for a particular period. The balanced transaction table has the form shown in the
following table. The figures given are in billions of shillings.
INPUT TO External Total
A B C Demand Output
Output from A 18 30 45 15 108
Output from B 27 30 60 3 120
Output from C 54 40 60 26 180
Other input 9 20 15
Total input 108 120 180
Required:-
a) Derive the input output matrix from the above data.
b) If the external demand was to change from 15, 3 and 26 billion shillings to 10, 2 and 20
billion, calculate the total output for sector A, B and C.
9. A small economy has three main industries which are steel, motor vehicles and construction.
The industries are interdependent. Each unit of steel output requires 0.2 units from steel, 0.3
units from motor vehicles and 0.4 units from construction. A unit of motor vehicles output
requires 0.2 units of steel, 0.4 units from motor vehicles and 0.2 units from construction. A
unit of construction output requires 0.3 units of steel, 0.4 units from motor vehicles and 0.1
units from construction. The final demand is 20 million units from steel, 50 million units from
motor vehicles and 30 million units from construction.
Required:-
a) The technical coefficient matrix
b) If the final demands from steel drops by 2 million units and that from motor vehicles
increases by 10 million units, but there is no change in the final demand from construction,
what would be the change in the total output of constructions?

17
10. An economy consists of three interdependent sectors; agriculture, mining and manufacturing.
The flow of inputs and outputs between the industries is represented in the table below:-
Inputs (Tonnes) Final
Output(Tonnes) Agriculture Mining Manufacturing demand
Agriculture 20,000 32,500 37,500 10,000
Mining 30,000 65,000 37,500 30,000
Manufacturing 40,000 32,500 12,500 40,000

Required:-
a) The technical coefficient matrix
b) The leontiff inverse matrix
c) The output level for each sector of the final demand for the agricultural sector increases by 1000
tons and that of the manufacturing sector falls by 500 tons and the final demand for the mining
sector remains unchanged.

18
 LESSON TWO: MARKOV ANALYSIS

2.0 Introduction

Markov analysis is a descriptive tool designed to predict the behaviour of a

system over time. This lesson covers the concept of Markov analysis, its assumptions,
computation of transition probabilities, state conditions steady states and analysis of absorbing
chains.

2.1 Lesson Objectives

By the end of the lesson, the students should be able to;

i. State the assumptions of markov analysis
ii. Compute the state probabilities and steady states
iii. Analyze absorbing chains

Markov analysis is a descriptive tool designed to predict the behaviour of a system over time. A
markov analysis is a procedure that can be used to describe the behaviour of a system in a dynamic
situation. Specifically, it describes and predicts the movement of a system, among different system
states, as time passes. This movement is done in a probabilistic (stochastic) environment. To be

19
able to predict the future movements and conditions of such a system would be of value to the
management. Markov makes prediction such as:
➢ The probability of finding a system in any particular state at any given time.
➢ The long run probabilities of being in each state.

2.2 Assumptions of Markov analysis

The following are the assumptions of markov analysis

➢ The system has a finite number of discrete states, none of which is ‘absorbing’
(a state that, once entered, cannot be left).
➢ The system’s condition (state) in any given period depends only on its condition in the
preceding period and on the transition probabilities.
➢ The transition probabilities are constant over time.
➢ Changes in the system may occur once and only once each period.
➢ The transition period occurs with regularity.

2.3 Terms used in Markov Analysis

✓ Stochastic process:-it arises whenever we have a series of events in which each event is
determined by chance.
✓ Transition matrix: - it is a matrix containing probabilities of a process moving from a
certain condition (or state) in the current stage (time period) to one of the possible states in
the next stage. The elements in the matrix are transitional probabilities.
✓ Recurrent state: it’s a state in which the probability is one that will be reentered at some
time in future but not necessarily in the next immediate time.
✓ Steady state:-It is a time reached by the process where the probabilities no longer change
with time i.e. the process is in equilibrium. The systems state probabilities become
independent of time.

20
2.4 Information Flow in the Markov Analysis

The Markov model is based on two sets of input data, the transition matrix and the existing (initial)
conditions. From these inputs, the model makes two predictions, usually expressed as vectors:
➢ The probabilities of the system being in any state, at any given future time.
➢ The long-run (Steady state) probabilities.

The transitional probabilities

The markov process describes the movement of a system from a certain condition (or state) in the
current stage (time period) to one of n possible states in the next stage. The system moves in an
uncertain environment. All that is known is the probability associated with any possible move
(transition). This probability termed the transition probability, Pij is the likelihood that the system
currently in state i, will move to state j in the next period. The transitional probabilities can be
found by undertaking a marketing research- asking people about their preferences and seeing how
they change over time, monitoring their actions over time and directly monitoring the flow of items
over time.
Initial conditions:-It describes the situation the system is currently in. It is always described by a
row matrix
State probabilities:-These are the probabilities of a given system being in a certain state at any
given time period. The initial probabilities and the transition probabilities are used to derive the
state probabilities.
Steady state (equilibrium) conditions
One of the major properties of markov chains is that, in the long run, the process usually stabilizes.
A stabilized system is said to approach steady state or equilibrium when the system’s state
probabilities have become independent of time

Example One
The manufacturer of Tamu Soft drinks has been facing stiff competition on its main brand Tamu-
Cola soda. The management is considering an extensive advertising and rebranding campaign for
Tamu-Cola soda. If the current branding remains, the transition matrix of consumers between
tamu-Cola and other brands will be as follows:-

21
 To
Tamu -Cola Others
From Tamu –Cola 0.85 0.15
Others 0.25 0.75

After the advertising and rebranding campaign, the transition matrix is expected to change as
follows:-
To
Tamu -Cola Others
From Tamu –Cola 0.9 0.1
Others 0.3 0.7
The advertising and rebranding campaign is expected to cost Sh. 20 million each year. There
are 40 million consumers of soft drinks in the market and for each consumer, the average
profitability is Sh. 5 annually. Required:-
a) The equilibrium state proportion of consumers using tamu-Cola
i. Before the advertising campaigns
ii. After the advertising campaign
b) The expected annual profit increase or decrease after the advertising campaign. Would you
recommend the advertising campaign?
Solution
(a) The equilibrium state proportion before the advertising campaign
0.85 0.15
x 1 − x   = x 1 − x 
0.25 0.75
0.85 x + 0.25 − 0.25 x = x
0.25 = 0.4 x
0.25
x = = 0.625
0.4
1 − x = 1 − 0.625 = 0.375
 The equillibrium state proportion before advertising campaigns is 0.625 0.375

The equilibrium state proportion before the advertising campaign

22
 0.9 0.1
x 1 − x   = x 1 − x 
0.3 0.7 
0.9 x + 0.3 − 0.3 x = x
0.3 = 0.4 x
0.3
x = = 0.75
0.4
1 − x = 1 − 0.75 = 0.25
 The equillibrium state proportion after advertising campaigns is 0.75 0.25

(b) The expected annual profit increase or decrease after the advertising campaign.

Profits before advertising campaigns = (0.625 * 40,000,000 * 5) = 125,000,000

Profits after advertising campaigns = (0.75 * 40,000,000 * 5) − 20,000,000 = 130,000,000

Annual profit increase = 130,000,000 − 125,000,000 = 5,000,000

Yes, I would you recommend the advertising campaign

Example Two
In a small town with three advocates X, Y and Z, each advocate knows that some clients switch
back and forth, depending on which advocate is available at the time the client needs one. There
are no new clients in the current legal market; however, none of the old clients are leaving the area.
During a slack period, the three advocates collected data which identified the number of clients
each advocate had seen during the preceding year. Table 1 summarizes the results of this study
and Table 2 summarizes the manner in which the clients were gained or lost.
TABLE 1: Data Summary – Client Activity
Advocate Clients as at Change during the year Clients as at
January 1, 2008 Gain Loss January 1, 2009
X 400 75 50 425
Y 500 50 150 400
Z 500 100 25 575

TABLE 2: Gain – loss Summary

23
 Advocate Clients Gains losses Clients
as at From X From From To To To as at
January Y Z X Y Z January
1, 2008 1, 2009
X 400 0 50 25 0 50 0 425
Y 500 50 0 0 50 0 100 400
Z 500 0 100 0 25 0 0 575
Construct the state transition matrix that describes the above problem.

Solution
The transition matrix will be given by
To
X Y Z
X  350 50 
 400 0 
400 0.875 0.125 0 
Y  50 100  
0.2 
350
From   = 0.1
 0.7
 500 500 500 
Z  25 475   0.05 0 0.95
 500 0
500 

Example Three
Habib’s food liner, Ngugi’s Supermarket and Quick Stop groceries are the only three grocery
stores in sand town, a small town in Northern Kenya. A market research involving shoppers over
a ten week period indicated that Habib retains 85% of its shoppers while 10% and 5% shift to
Ngugi’s and Quick Stop respectively each subsequent week. Ngugi’s lose 20% to Habib and 5%
to Quick stop. Of those who shop in Quick stop, 15% and 10% shift to habib and Ngugi
respectively. The total grocery store customers in sand town are estimated at 10,000. Each shopper
generates revenue of about KSh. 500 per week. What are the projected weekly revenues for each
grocery store at equilibrium?
(a) The transitional matrix is given by

24
 0.85 0.1 0.05
0.20 0.75 0.05
0.15 0.10 0.75

Let p, q and r denote the proportion of customers who shop in H, N and Q respectively.
0.85 0.1 0.05
 p q r 0.20 0.75 0.05 =  p q r 
0.15 0.10 0.75
0.85 p + 0.20q + 0.15r = p..............(i )
0.1 p + 0.75q + 0.10r = q................(ii )
0.05 p + 0.05q + 0.75r = r...................(iii )
p + q + r = 1 p = 1 − q − r...................(iv)
substituting (iv) int o(ii )
0.1(1 − q − r ) + 0.75q + 0.10r = q
0.1 − 0.1q − 0.1r + 0.75q + 0.1r = q
− 0.35q = −0.1
 q = 10 = 0.2857
35

substituting (iv) int o(iii )

0.05(1 − q − r ) + 0.05q + 0.75r = r
0.05 − 0.05q − 0.05r + 0.05q + 0.75r = r
0.3r = 0.05
 r = 5 = 0.1667
30
p = 1 − q − r = 1 − 0.2857 − 0.1667 = 0.5476

The total number of shoppers in each grocery n the long run will be:
0.5476 5476 
10,000 0.2857  = 2857 
0.1667  1667 

The weekly revenues for each grocery at equilibrium will be:-

25
 5476  2,738,000
500 2857  = 1,428,000 
1667   833,500 

Example Four
A university’s service department is considering leasing one of two possible computers. A
computer can be found in operating condition (O) or nonoperating condition (NO). The daily
transition matrix of the two computers under identical maintainance follows:
Computer A Computer B
O NO O NO
O 0.95 0.05 O 0.98 0.02
NO 0.90 0.10 NO 0.85 0.15
Which computer should the university lease if the leasing charges are the same?

Solution

In order to find which computer the university should lease if the leasing charges are the same, we
find the long-run probabilities
Computer A
0.95 0.05
p q   =  p q
0.90 0.10
0.95 p + 0.90q = p
0.05 p + 0.10q = q
p + q = 1 p = 1 − q
substituting ;
0.05(1 − q ) + 0.10q = q
0.05 − 0.05q + 0.10q = q
− 0.95q = −0.05
q = 5 = 0.05
95
 p = 1 − 0.05 = 0.95
Computer B

26
 0.98 0.02
p
q   =  p q
0.85 0.15
0.98 p + 0.85q = p
0.02 p + 0.15q = q
p + q = 1 p = 1 − q
substituting ;
0.02(1 − q ) + 0.15q = q
0.02 − 0.02q + 0.15q = q
− 0.87 q = −0.02
q = 2 = 0.02
87
 p = 1 − 0.02 = 0.98

Therefore, since computer B will be operational most of the time (98%), the university should
lease it.

Example Five
The following table indicates the customers buying behaviour for a given product Produced by
ABC Company with two brands. Currently, the market share for Brand A is 27.5%, Brand B is
37.5% and Competitor’s Brand C is 35%.
Next months brand
Choice Brand A Brand B Competitors
Current months Brand C
Choice

Brand A 0.2 0.2 0.6

Brand B 0.1 0.5 0.4
Competitors Brand C 0.5 0.2 0.3
Determine
(a) The market shares one month and two months from now.
(b) The long run probabilities
(c) ABC Company is considering two alternative policies for promoting its products

27
 1. Promote Brand A only. This will cost Sh. 150,000 invested in a lump sum and is
expected to change the transition matrix to:
To A B C
From
A 0.6 0.2 0.2
B 0.4 0.4 0.2
C 0.6 0.1 0.3

2. Promote Brand B only. This will cost Sh. 280,000 invested in a lump sum and is
expected to change the transition matrix to:
To A B C
From
A 0.1 0.5 0.4
B 0.2 0.8 0
C 0.3 0.5 0.2

Required:
i. Which policy will bring larger increases in ABC’s total share of the market in the long
run?
ii. Which policy will be more efficient in terms of the gain per one thousand shilling invested
in the long run?
iii. Assume that each percentage of increased share in the total market is worth Sh.10,000 to
ABC’s; which policy (if any) should ABC take?

Solution
(a) The market shares one month from now will be:-
0.2 0.2 0.6
0.275 0.375 0.35 0.1 0.5 0.4 = 0.2675 0.3125 0.42
0.5 0.2 0.3

(b) In the long run

28
 0.2 0.2 0.6
x y 1 − x − y  0.1 0.5 0.4 = x y 1 − x − y 
0.5 0.2 0.3
0.2 x + 0.1 y + 0.5 − 0.5 x − 0.5 y = x
0.5 = 1.3 x + 0.4 y............................(i )
0.2 x + 0.5 y + 0.2 − 0.2 x − 0.2 y = x
0.2 = 0.7 y
0.2
y = = 0.2857
0.7
0.5 − (0.4 * 0.2857)
x= = 0.2967
1.3
1 − x − y = 1 − 0.2857 − 0.2967 = 0.4176
 The long run probabilities are 0.2967 0.2857 0.4176

(c) Long run Probabilities

(i) Long run probability if brand A only is promoted
0.6 0.2 0.2
x y 1 − x − y 0.4 0.4 0.2 = x y 1 − x − y 
0.6 0.1 0.3
0.6 x + 0.4 y + 0.6 − 0.6 x − 0.6 y = x
0.6 = x + 0.2 y.................(i )
0.2 x + 0.4 y + 0.1 − 0.1x − 0.1 y = y
0.1 = −0.1x + 0.7 y................(ii )
Solving equation (i) and (ii) simultaneously, we have
0.6 = x + 0.2y → 0.6 = x + 0.2 y
10(0.1 = -0.1x + 0.7y) → 1 = − x + 7 y
1.6 = 7.2y
1.6
y = = 0.2222
7.2
x = 0.6 − (0.2 * 0.2222) = 0.5556
1 − x − y = 1 − 0.5556 − 0.2222 = 0.2222
 The long run probabilities if Brand A only is promoted is 0.5556 0.2222 0.2222

Long run probability if brand B only is promoted

29
  0.1 0.5 0.4
x y 1 − x − y 0.2 0.8 0  = x y 1 − x − y 
0.3 0.5 0.2
0.1x + 0.2 y + 0.3 − 0.3 x − 0.3 y = x
0.3 = 1.2 x + 0.1 y.................(i )
0.5 x + 0.8 y + 0.5 − 0.5 x − 0.5 y = y
0.5 = 0.7 y
0.5
y = = 0.7143
0.7
0.3 − (0.1 * 0.7143)
x= = 0.1905
1.2
1 − x − y = 1 − 0.1905 − 0.7143 = 0.0952
 The long run probabilities if Brand b only is promoted is 0.1905 0.7143 0.0952
The market share for ABC :-
• Before promotion = 0.2967 + 0.2857 = 0.5824
• If Brand A only is promoted = 0.5556 + 0.2222 = 0.7778
• If Brand B only is promoted = 0.1905 + 0.7143 = 0.9048
Therefore the policy which will bring a larger increase in ABC’s total share of the market in the
long run is promoting Brand B only

(ii) Increase in the market shares if :-

• If Brand A only is promoted = 77.78% - 58.24% = 19.54%

• If Brand B only is promoted = 90.48% - 58.24% = 32.24%

Brand A only
150000 = 19.54%
1000 = ?
1000
 * 19.54% = 0.13%
150000

Brand B Only

30
 280000 = 32.24%
1000 = ?
1000
 * 32.24% = 0.12%
280000

Therefore promoting Brand A only is more efficient in the long run

(iii) Profit = Total Revenue – Total Cost

• If Brand A only is promoted, Profit = (19.54 * 10000) − 150000 = 45400
• If Brand B only is promoted, Profit = (32.24 * 10000) − 280000 = 42400
Therefore Promoting Brand A is better

2.5 Absorbing States

If there are n states, out of which m are absorbing states, and n − m transient states, the matrix is
expressed as follows:

Q R 
P= 
O I 
In the above matrix, rows and columns of P correspond to states 1,2,......, n − m ; Q represents the
square matrix of the order n − m of transient probabilities representing transitions between
transient states: R is an n − m by m matrix representing transitions from transient to absorbing
states ; I is an identity matrix of the order m , depicting the fact that it is not possible to go from
one absorbing state to another, and O is a null matrix consisting of all zeros. The matrix I − Q 
−1

is known as the fundamental matrix of the markov chains. The ij th element of this matrix gives the
expected number of periods that will be spent in the transient state i before reaching an absorbing
state. Similarly, if the chain begins in a given transient state i , the probability that it shall be

eventually in absorbing state j would be given by the ij th element of the matrix I − Q  R .

−1

Example One

31
A company has two production departments X and Y and three service departments A, B and C.
The direct cost allocated to each of the departments and percentage of total cost of each service
department apportioned to various departments are given below:-
Department Direct Cost Percentage allocation of total cost of
(Sh.) the department
A B C
X 120,000 40 30 30
Y 290,000 30 30 50
A 25,000 0 30 10
B 124,000 20 0 10
C 77,000 10 10 0
Draft this problem as absorbing chain and determine the total cost (allocated and apportioned)
for each production department
Solution
The matrix P will be as given below:-
A B C X Y
A 0 0.2 0.1 0.4 0.3
B 0.3 0 0.1 0.3 0.3
P=
C 0.1 0.1 0 0.3 0.5
X 0 0 0 1 0
Y 0 0 0 0 1

 0 0.2 0.1  0.4 0.3

Q = 0.3 0 0.1 R = 0.35 0.3
0.1 0.1 0  0.15 0.4

1 0 0  0 0.2 0.1  1 − 0.2 − 0.1

I − Q = 0 1 0 − 0.3 0 0.1 = − 0.3 1 − 0.1
0 0 1 0.1 0.1 0   − 0.1 − 0.1 1 

32
 Finding the cofactors, we have
 1 − 0.1 − 0.3 − 0.1 − 0.3 1 
+ − + 
 − 0.1 1 − 0.1 1 − 0.1 − 0.1 
0.99 0.31 0.13
 − 0.2 − 0.1 − 0.1 − 0.2  
= 0.21 0.99 0.12
1 1
− − 0.1 1
+
− 0.1 1
−
− 0.1 − 0.1  
 0.12 0.13 0.94
 − 0.2 − 0.1 1 − 0.1 1 − 0.2  
+ − 0.1
−
− 0.3 − 0.1
+
− 0.3 1 
 1

Determinant = (1 * 0.99) + (−0.2 * 0.31) + (−0.1 * 0.13) = 0.915

0.99 0.21 0.12  0.4 0.3 0.54098 0.45902

I − Q −1
R= 1  0.31 0.99 0.13 0.35 0.3 = 0.50273 0.49727 
0.915     
0.13 0.12 0.94 0.15 0.4 0.40437 0.59563

The cost apportioned will be

0.54098 0.45902
25000 124000 770000.50273 0.49727 = 106999.51 119000.49
0.40437 0.59563

The total cost allocated and apportioned will be

X = 120000 + 106999.51 = 226999.51
Y = 290000 + 119000.49 = 409000.49

Example Two
ABC Company has three service departments X, Y and Z and two production departments A and
B. Overhead is allocated to the production departments for inclusion in the stock valuation. The
analysis of benefits received by each department during the last quarter and the overhead expense
incurred by each department were as follows:
Service departments Percentage to be allocated to departments
X Y Z A B

33
 X 0 25 5 40 30
Y 10 0 25 35 30
Z 30 15 0 15 40
Direct overhead expense (Sh.’000) 60 25.5 60.5 26 84
Formulate the above as an absorbing chain and determine the total overhead to be allocated
from each of the service departments X, Y and Z to the production departments.

Solution
The matrix P will be as given below:-
X Y Z A B
X 0 0.25 0.05 0.4 0.3
Y 0.1 0 0.25 0.35 0.3
P=
Z 0.3 0.15 0 0.15 0.4
A 0 0 0 1 0
B 0 0 0 0 1

 0 0.25 0.05  0.4 0.3

Q = 0.1 0 0.25 R = 0.35 0.3
0.3 0.15 0  0.15 0.4

1 0 0  0 0.25 0.05  1 − 0.25 − 0.05

  
I − Q = 0 1 0 − 0.1 0  
0.25 =  − 0.1 1 − 0.25
0 0 1 0.3 0.15 0  − 0.3 − 0.15 1 

Finding the cofactors, we have

34
  1 − 0.25 − 0.1 − 0.25 − 0.1 1 
+ − + 
 − 0.15 1 − 0.3 1 − 0.3 − 0.15 
0.9625 0.175 0.315
 − 0.25 − 0.05 − 0.05 − 0.25  
= 0.2575 0.985 0.225
1 1
− − 0.15 1
+
− 0.3 1
−
− 0.3 
− 0.15 
 0.1125 0.255 0.975
 − 0.25 − 0.05 1 − 0.05 1 − 0.25  
+ − 0.25
−
− 0.1 − 0.25
+
− 0.1 1 
 1

Determinant = (1 * 0.9625) + (−0.25 * 0.175) + (−0.05 * 0.315) = 0.903

0.9625 0.2575 0.1125  0.4 0.3 0.5449 0.4551

I − Q −1
R= 1  0.175 0.985 0.255  0.35 0.3 = 0.5017 0.4983
0.903     
 0.315 0.225 0.975  0.15 0.4 0.3887 0.6113

The total cost apportioned will be:-

0.5449 0.4551
60000 25500 605000.5017 0.4983 = 69003.7 79996.3
0.3887 0.6113

The total cost allocated and apportioned will be

A = 26000 + 69003.7 = 95003.7
B = 84000 + 79996.3 = 163996.3

2.6 Activities

1. One half of a country’s population lives in the city and one half in the suburbs. There is an
80% chance that a suburban resident will remain in the suburbs and a 20% chance that he or
she will move to the city within the next month. A city dweller has a 50-50% chance of staying
in the city or moving to the suburbs. Determine:

35
 (a) The percentage of the population who will be in the suburb and the city one and two
months from now.
(b) The steady state probabilities.

2. Joe Fundi, the caretaker manager of sky towers is in the process of deciding which of two
elevator maintenance companies to select for providing maintenance and repair services for
the buildings elevators. The guarantees for promptness and quality of service form one week
to the next for the two companies are as follows.
Quick response service Ltd JIT Elevator Service Ltd
To To
From Operation Breakdown From operation breakdown
Operation 0.85 0.15 Operation 0.95 0.05
Breakdown 0.95 0.05 Breakdown 0.85 0.15
Advise Joe Fundi on which of the two elevator companies to select.

3. Continental Corporation operates a large fleet of cars for which an extensive preventive
maintainance program is utilized. The cars can be classified in one of the three states: Good
(G), Fair (F) and poor (P). The transition matrix of these cars is as follows:
TO G F P
FROM
G 0.6 0.3 0.1
F 0.2 0.6 0.2
P 0.1 0.4 0.5
Required:
i. Assume that currently there are 100 cars in good shape, 60 in fair shape and 20 in poor
shape. How many cars will be found in each condition next week?
ii. How many cars will be found in each condition once the process stabilizes?

4. The market for homeowners insurance in a particular city is dominated by two companies:
national property and United family. Currently, national property insures 50% of the homes in
the city, united family insures 20% and the remainder are insured by a collection of smaller

36
 companies. United family decides to offer rebates to increase its market share. This has the
following effects on the insurance purchases for the next several years; each of 30% of national
property’s customers switch to united family and 10% switch to other companies, 20% of
united family customers switch to national property and 5% switch to other companies, 30%
of the customers of other companies switch to national property and 40% switch to united
family. Determine the market share of the companies after two years and also in the long run.
5. A manufacturer uses Machine Z in one of its production processes. Due to its constant usage,
the machine is inspected for maintenance purposes on a monthly basis. On inspection, the
condition of the machine is classified into four possible states as follows:-
State 1: Good
State 2: Minor repairs
State 3: Major repairs
State 4: Write off
Thereafter, the manufacturer adopts either of the following maintainance policies:-
Policy 1: Minor repairs if the machine is in state 2, overhaul if the machine is in state 3
and replace if the machine is in state 4
Policy 2: Minor repairs if the machine is in state 1, 2 or 3 and replace the machine if it is
in state 4

The costs of maintainance associated with each policy are shown in the table below:-
State Policy 1 (Sh.) Policy 2 (Sh.)
1 0 0
2 100,000 100,000
3 400,000 300,000
4 600,000 600,000
The transition probability matrices for each policy are as given below:-
Policy 1 Policy 2
To To
1 2 3 4 1 2 3 4

37
 1 0 0.8 0.1 0.1 1 0 0.8 0.1 0.1
2 0.1 0.6 0.2 0.1
 2 0 0.5 0.4 0.1
from  From  
3 0.05 0.3 0.45 0.2 3 0 0 0.4 0.6
   
4 1 0 0 0 4 1 0 0 0
Required:-
a) The long-run proportion of times the machine would be expected to be in each state if Policy
1 is adopted
b) The long run proportion of times the machine would be expected to be in each state if policy
2 is adopted
c) The expected long run average cost for each policy
d) The policy you would recommend to the manufacturer

6. A company has two production departments X and Y and three service departments A, B and
C. The direct cost allocated to each of the departments and percentage of total cost of each
service department apportioned to various departments are given below:-
Department Direct Cost Percentage allocation of total cost
(Sh.) A B C
X 80,000 40 30 30
Y 90,000 20 40 20
A 10,000 0 20 30
B 20,000 20 0 20
C 50,000 20 10 0
Draft this problem as absorbing chain and determine the total cost (allocated and apportioned)
for each production department

7. A credit card company is attempting to determine a more effective set of credit control policies.
It has traditionally classified all its accounts receivables into one of the five categories listed
below:-

Accounts receivable category Status of accounts receivable

1 0 – 30 days late

38
 2 31 – 90 days late
3 91 + days late
4 Paid in full
5 Defaulted
Based on the historical data, the company has derived the following transition matrix describing
the behaviour of various categories on a weekly basis
From To category
category 1 2 3 4 5
1 0.4 0.2 0.1 0.2 0.1
2 0.3 0.4 0.1 0.1 0.1
3 0.2 0.4 0.1 0.1 0.2
4 0.0 0.0 0.0 1.0 0.0
5 0.0 0.0 0.0 0.0 1.0
Currently, the company has the following accounts receivables in various categories:
Category Amount (Sh)
1 2,000,000
2 4,000,000
3 3,000,000
Required: Calculate the expected amounts which may eventually be:
(a) Collected
(b)Defaulted

39
 LESSON THREE: LINEAR PROGRAMMING

3.0 Introduction

Linear programming is a mathematical technique that deals with the

optimization of a linear function of variables known as objective function to a set of
linear inequalities known as constraints. It is a method of determining an optimum
programme of inter-dependent activities in view of available resources.

3.1 Expected Learning Outcomes

By the end of the lesson the students should be able to:

➢ Define the term linear programming
➢ Describe the assumptions of linear programming
➢ Formulate and solve linear programming problems using both the graphical
and simplex method
➢ Identify the various applications of linear programming
➢ Discuss the advantages and disadvantages of linear programming

3.2 Definition of Linear Programming

➢ It is a mathematical technique that deals with the optimization of a linear function of variables
known as objective function to a set of linear inequalities known as constraints.
➢ It is a method of determining an optimum programme of inter-dependent activities in view
of available resources.

40
3.3 Basic parts of a linear programming problem
i. The objective function: it describes the primary purpose of the formulation i.e. to
maximize profit or to minimize cost.
ii. The constraint set: It is a system of equalities and / or inequalities describing the conditions
under which optimization is to be accomplished e.g. machine hours, man-hours, materials
etc.

3.4 Assumptions of Linear programming

➢ Linearity: Costs, revenues or any physical properties, which form the basis of the
problem, vary in direct proportion with the quantities or numbers of components
produced.
➢ Divisibility: Quantities, revenues and costs are infinitely divisible i.e. any fraction or
decimal answer is valid.
➢ Certainty: The technique makes no allowance for uncertainty in the estimate made.
➢ Positive solutions: Non-negativity constraints are introduced to ensure only positive
values are considered.
➢ Interdependence between demand products is ignored, products may be complementary
or a substitute for one another.
➢ Time factors are ignored. All production is assumed to be instantaneous.
➢ Costs and benefits which cannot be quantified easily, such as liquidity, good will and
labour stability are ignored.

3.5 Applications of Linear Programming

➢ Business and industry e.g. in the petroleum industry
➢ Food processing industry: to determine the optimal mix of feeds
➢ Paper and textile industry: To determine the optimal cutting method to minimize trim
losses
➢ Transport industry: To determine the best route
➢ Financial institutions – to determine investment plans.

41
 ➢ Advertising media: assigning advertising expenditures to different media plans.
➢ Politics- campaign strategies
➢ Auditing – to find the number of financial audits
➢ Agriculture- amount of fertilizer to apply per acre
➢ Hospital scheduling- number of nurses to employ
➢ Marketing – determining the best marketing strategy
➢ Crude oil refining

3.6 Mathematical formulation of Linear Programming problems

If there are n decision variables and m constraints in the problem, the mathematical formulation of
the LP is:-
Optimization (Max or Min) Z = c1 x1 + c 2 x 2 + ........ + c n x n

Subject to the constraints

a11 x1 + a12 x 2 + ............ + a1n x n  b1

a 21 x1 + a 22 x 2 + ............ + a 2 n x n  b2

a m 1 x1 + a m 2 x 2 + ............ + a1n x n  bm

and x1 , x 2 ,........x n  0

where
X i − decision var iable

Cj − constant representing per unit contribution of the objective function of the

jth decision variable
ai j − constant representing exchange coefficient of the jth decision variable in the

ith constraint
bi − constant representing ith constraint requirement or availability

42
Example

XYZ chemical company is producing two products A and B. the processing times are 3 hrs and 4
hrs per unit for A on operations one and two respectively and 4 hrs and 5 hrs per unit for B on
operations one and two respectively. The available time is 18 hrs and 21 hrs for operations one
and two respectively. The product A can be sold at Sh. 3 profit per unit and B at Sh.8 profit per
unit. Formulate the above as a LP problem.

Solution
Let x = one unit of product A and y = one unit of product B.
The constraints are the available times on machine one and two

X y Availability
Operation one 3 4 18
Operation two 4 5 21

Therefore the linear programming problem would be

maximize Z = 3x + 8y
subject to :
3 x + 4 y  18
4 x + 5 y  21
x  0, y  0

Solutions to LP problems
LP problems can be solved by the help of the following methods:
i. Graphical method
ii. Simplex method

3.7 Graphical solution method

In order to solve a LP problem graphically, the following procedure is adopted:-

43
 i. Formulate the appropriate LP problem
ii. Graph the constraint inequalities as follows: treat each inequality as though it were an equality
and for each equation, arbitrarily select two sets of points. Plot each of the points and connect
them with appropriate lines.
iii. Identify the solution space or feasible region which satisfies all the constraints
simultaneously. For  constraints, this region is below the lines and for  constraints, the
region is above the lines.
iv. Locate the solution points on the feasible region. These points always occur at the corner
points of the feasible region.
v. Evaluate the objective function at each of the corner points.
vi. Identify the optimum value of the objective function.

Example
Max Z = 50 x + 18 y
s.t.
2 x + y  100
x + y  80
x, y  0
Identifying the points to plot
From equation (i) 2 x + y = 100 →
x 0 100
y 50 0

From equation (i) x + y = 80 →

x 0 40
y 40 0
Drawing the graph and identifying the feasible area we have

44
Evaluating the objective function at the corner points
Corner Point X Y Max Z = 50 x + 18 y
A 0 80 18*80 = 1440
B 20 60 (50*20) + (60*18) = 2080
C 50 0 50 * 50 = 2500

Optimal solution : X = 50 and Y = 0

Maximum value of the objective function is 2500

45