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ICAP PRC-2 · QUANTITATIVE ANALYSIS FOR BUSINESS · CHAPTER 4

Linear Programming

Key Definitions · Core Concept · Key Rules & Principles · Formula Zone · Step-by-step Methods · Different Cases / Scenarios · Comparison Tables

Premium Exam Revision · Prepared by Haleema Lateef · Learning League
1

Chapter Overview

🧭

Your visual roadmap through the chapter

Linear Programming

Inequalities, terminology, graphical method, corner-point & slope methods

LP of Business Problems

Formulating constraints & objective functions from real scenarios

Marginal Analysis

Marginal cost, marginal revenue, marginal profit

An optimization technique that finds the best (maximum or minimum) value of a linear objective function, subject to a set of linear constraints (inequalities).

Product-mix, resource-allocation and cost-minimisation decisions are all classic business problems solved using linear programming's graphical approach.

Translate word problems into inequalities; plot constraints; identify the feasible region; find the optimum using corner points or slopes; spot redundancy/unboundedness.

2

Key Definitions

📘

Source-based terminology, exam-ready

Linear Programming Problem

A problem requiring the optimum (minimum or maximum) value of a function, subject to certain restrictions.

Key word: optimize + restrictions

Objective Function

In an LP problem, the function to be maximized or minimized.

Key word: maximize/minimize

Constraints

The set of restrictions, given by linear inequalities, that the solution must satisfy.

Key word: restrictions

Feasible Region

The area containing all the (usually infinite) combinations of x and y that satisfy every constraint — the feasible solutions.

Key word: all valid combinations

Optimum Solution

The one feasible point, out of infinite feasible points, that gives the maximum or minimum value of the objective function.

Key word: the best point

Positive (Non-Negativity) Constraints

x ≥ 0 and y ≥ 0. These limit the feasible region to the first quadrant and do not need to be plotted — they are the axes themselves.

Key word: x,y ≥ 0

Corner Points

The points where the borders (edges) of the feasible region cross one another.

Key word: where edges meet

Redundant Constraint

A constraint whose removal does not change the feasible region, and so cannot affect the optimal solution.

Key word: removable, no effect

3

Core Concept

🎯

Explained in exam-oriented language

CONCEPT → Linear Programming

MEANING

An "optimization technique" — taking linear inequalities relating to a situation and finding the "best" value obtainable.

PURPOSE

Find the best combination of x and y that maximizes or minimizes an objective function.

APPLICATION

Maximum profit from a product mix limited by resources; minimum cost across alternative inputs.

CONCEPT → Feasible Region & Optimum

MEANING

The shaded area representing all combinations of x, y allowed by the constraints.

PURPOSE

The optimum always lies at a corner point of the feasible region's outer edge.

APPLICATION

Test each corner in the objective function (corner point theorem), or compare slopes.

4

Key Rules & Principles

📏

Every source rule, exam-ready

RULE 1 The 6-step LP approach

1. Define variables 2. Construct inequalities for constraints

3. Plot the constraints on a graph 4. Identify the feasible region

5. Construct the objective function 6. Identify the optimum x, y

RULE 4 Wording → inequality sign

Maximum limit / "cannot exceed" / "no more than" → use ≤

Minimum limit / "at least" / "must supply no less than" → use ≥

A range (e.g. "5 to 7 units") → write as a double inequality (both ≥ and ≤)

RULE 2 Plotting an inequality line

If it has x- and y-intercepts: ignore the inequality sign, treat as an equation, set x=0 to find the y-intercept and y=0 to find the x-intercept, then join the two points

If it passes through the origin (no intercepts): pick any two points that satisfy the equation and join them

RULE 5 Maximizing vs minimizing

Maximizing (e.g. profit): optimum is the corner point furthest from the origin

Minimizing (e.g. cost): optimum is the corner point closest to the origin

RULE 6 Redundancy & unboundedness

A constraint is redundant if removing it leaves the feasible region unchanged

An LP is unbounded if the objective function can improve without limit inside the feasible region — no finite optimal solution exists

If no combination satisfies every constraint together, there is no feasible region / no feasible solution

RULE 3 Shading the correct side

Test the origin (0,0) in the inequality

If it satisfies the inequality → shade the side near the origin

If it does not satisfy the inequality → shade the side away from the origin

5

Formula Zone

🧮

Every formula supported by the source text

OBJECTIVE FUNCTION (GENERAL FORM)

Z (or C) = c1x + c2y

c1, c2 = contribution/profit or cost per unit of x and y. Maximize for profit/contribution; minimize for cost.

CORNER POINT THEOREM

Substitute each corner (x,y) into Z → compare results

The optimum solution is the corner giving the highest Z (maximize) or lowest Z (minimize).

SLOPE COMPARISON METHOD

Rearrange each line into y = (intercept) + (slope)x

The optimum lies at the intersection of the two constraints whose slopes bracket the objective function's slope.

MARGINAL PROFIT

Marginal Profit = Marginal Revenue − Marginal Cost

For a linear objective function, marginal profit is constant — it equals the coefficient of that decision variable.

Marginal Analysis — Definitions Recap

Marginal Cost (MC): the additional cost of producing one more unit; the rate of change of cost with output.

Marginal Revenue (MR): the additional revenue from selling one more unit; in a linear objective function, MR is simply the coefficient of that decision variable, and stays constant.

6

Calculation Roadmap

🗺️

General path for any LP question

1· Read Question

Identify the decision variables and limits

2· Build Constraints

Translate wording into inequalities

3· Plot & Shade

Find intercepts, shade the feasible region

4· Find Corners

Solve intersecting lines simultaneously

5· Optimize & Check

Test corners in objective function, state answer

7

Step-by-step Methods

🪜

Kept separate — do not mix methods

METHOD A · Formulating an LP Problem

  1. 1Define a variable for each product/outcome to be optimized
  2. 2Write one constraint per limiting resource, using ≤ for maximums, ≥ for minimums
  3. 3Add non-negativity constraints x,y ≥ 0
  4. 4Write the objective function to maximize or minimize

METHOD C · Corner Point Theorem

  1. 1Identify every corner point of the feasible region
  2. 2Solve pairs of intersecting constraint lines simultaneously for each corner's (x,y)
  3. 3Substitute each corner's (x,y) into the objective function
  4. 4Select the corner giving the best (max/min) result

METHOD B · Graphical Method (Plotting)

  1. 1For each constraint, set x=0 to find the y-intercept, and y=0 to find the x-intercept
  2. 2Plot and join the two intercepts for each line
  3. 3Test the origin in each inequality to decide which side to shade
  4. 4The overlapping shaded area is the feasible region

METHOD D · Slope Comparison Method

  1. 1Rearrange the objective function and each constraint into y = ... + (slope)x
  2. 2Rank the slopes in order
  3. 3Find the two constraints whose slopes bracket the objective function's slope
  4. 4Solve those two constraints simultaneously for the optimum (x,y)

METHOD E · Testing for Redundancy / Unboundedness / No Feasible Region

  1. 1Plot all constraints and identify the feasible region
  2. 2Remove one constraint at a time — if the region is unchanged, it is redundant
  3. 3If the feasible region is open-ended in the direction of optimization, the LP is unbounded
  4. 4If no region satisfies every constraint together, there is no feasible solution
8

Different Cases / Scenarios

🔀

Recognise the wording, pick the right route

IF wording says "cannot exceed" / "no more than" / maximum

→ USE ≤ in the constraint

IF wording says "at least" / "no less than" / minimum

→ USE ≥ in the constraint

IF a range is given (e.g. "5 to 7 units")

→ Write two inequalities (≥ lower, ≤ upper)

IF the objective is to maximize (e.g. profit)

→ Optimum is the corner furthest from the origin

IF the objective is to minimize (e.g. cost)

→ Optimum is the corner closest to the origin

IF removing a constraint leaves the feasible region unchanged

→ That constraint is redundant

IF the objective function can improve without limit in the feasible region

→ The LP is unbounded — no finite solution

IF no combination satisfies every constraint at once

→ There is no feasible region / solution

9

Comparison Tables

⚖️

Don't confuse these!

Corner Point TheoremSlope Comparison Method
ApproachTest every corner's (x,y) directly in the objective functionCompare the objective function's slope with each constraint's slope
When usefulFew corner points; straightforward substitutionQuickly narrows down which two constraints bound the optimum
ResultDirectly gives the best objective function valueIdentifies which two lines to solve simultaneously for the optimum
RedundancyUnboundedness
DefinitionA constraint that does not affect the feasible regionNo limit to improving the objective value within the feasible region
Effect on feasible regionNo changeInfinite extension in the direction of optimization
ImplicationCan be removed; simplifies the modelNo finite optimal solution exists — model needs revising
Constraint wordingSign to useExample
Maximum limit≤Maximum sales demand of 5,000 units → x ≤ 5,000
Minimum limit≥Supply at least 2,000 units → x ≥ 2,000
Non-negativity≥ 0Cannot make a negative number of products → x,y ≥ 0
10

Graph Interpretation

📈

Reading a linear programming graph

Reading the feasible region

The shaded (often double- or triple-shaded) area is the feasible region. Any (x,y) inside or on its boundary satisfies every constraint. The straight-line boundary of each constraint is its outer limit (maximum constraints) or inner limit (minimum constraints).

Reading corner points

Corner points are where boundary lines of the feasible region cross. The optimum solution always lies at one of these corners — never in the middle of the shaded area.

Reading the objective function line

Since the objective function's value (C) does not affect its slope, it can be plotted at any convenient value. Moving this line outward (maximizing) or inward (minimizing), parallel to itself, shows which corner it last touches — that corner is the optimum.

No feasible region

If, after plotting and shading, the constraints leave no overlapping shaded area, the problem has no feasible solution — there is no combination of x and y that satisfies every constraint at once.

11

Worked Calculation Logic

✍️

Method students must reproduce in the exam

GIVEN → FORMULA → SUBSTITUTION → CALCULATION → ANSWER

A company makes Product X (contribution $8) and Product Y (contribution $12). Direct labour: 3x+2y≤20,000; Machine time: x+2.5y≤12,000; sales demand x≤6,000, y≤4,000. Maximize C=8x+12y.

GIVEN: Objective C=8x+12y; constraints as above; corner points found by solving intersecting lines simultaneously.

FORMULA: Corner point theorem — substitute each corner's (x,y) into C=8x+12y

SUBSTITUTION / CALCULATION: Solve each pair of intersecting constraints for their corner (x,y), then compute C at each corner

FINAL ANSWER: Compare all corner values of C — the corner giving the highest C is the optimal product mix

12

Exam Question Patterns

📝

Formulation — write constraints & objective function from a word problem

Graph reading — match a shaded region to its set of inequalities (or vice versa)

Corner point calculation — solve simultaneous equations for a corner

Optimization — maximize profit/contribution or minimize cost

Redundancy / unboundedness / no feasible solution identification

Marginal cost/revenue/profit calculation questions

13

Exam Traps

⚠️

⚠ WATCH OUT

  • ✗ ≤ vs ≥ confusion — "no more than" is ≤, "at least" is ≥; reversing them flips the feasible region.
  • ✗ Forgetting non-negativity (x,y≥0) — without it, the feasible region can wrongly extend into other quadrants.
  • ✗ Shading the wrong side — always test the origin (or another point, if the line passes through the origin).
  • ✗ Maximize/minimize mix-up — picking the nearest corner for a maximization problem, or vice versa.
  • ✗ Treating a redundant constraint as binding — check whether removing it actually changes the feasible region.
14

Quick Decision Tree

🌳
QUESTION GIVEN
↓
Define variables → build constraints & objective function
↓
Plot & shade → identify feasible region & corners
↓
Maximize → furthest corner
Minimize → nearest corner
↓
CHECK → INTERPRET → FINAL ANSWER
⚡

Chapter 4 in 60 Seconds

⚡

6 steps: variables→constraints→plot→feasible region→objective→optimum

Max limit: ≤ Min limit: ≥

Shade test: plug in origin (0,0)

Corner point theorem: test each corner in Z

Slope method: objective slope sits between two constraint slopes Max → furthest corner; Min → nearest corner

Redundant: removable, no effect on region Marginal Profit = MR − MC

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All PRC-2 QAB revision notes
  1. Linear and Quadratic Equations
  2. Coordinate System and Its Application
  3. Mathematical Progression
  4. Linear Programming
  5. Financial Mathematics
  6. Discounted Cash Flows
  7. Data – Collection and Representation
  8. Statistical Measures of Data
  9. Indices
  10. Correlation and Regression
  11. Probability Concepts
  12. Probability Distributions