Business Math (Theory) ju
Business Math (Theory) ju
LINeAR PRogRAMMINg
Equation : Equation is a statement of equality between two expressions consisting of variables.
𝑦 = 𝑚𝑥 + 𝑐
2𝑥 − 4𝑦 − 3 = 0
Q – 01 : What is linear programing problem with example ? 22, 21, 20, 19, 18
Linear programing problem is a mathematical technique for determining optimal allocation of resources and obtaining a
particular objective.
Another definition, Linear programing problem is a method or technique of determining an optimum program of
interdependent activities in view of available resources.
3x + 3y ≤ 36
5x + 2y ≤ 50
2x + 6y ≤ 60
2x + 4y ≥ 50
3x + 7y ≥ 70
1. Objective function : In linear programming, in which we can get extreme values is called objective function.
2. Linear Inequality : For finding the extreme value, the imposed constraints/conditions are called linear inequality.
3. Slack Variables : The variables which are used to bring equality in the necessity of our interest is called slack variables.
4. Probable region : In linear programming, the part obtained possess probable solution is called probable region .
5. Feasible Solution : The problem of linear programming, the given values of the variables satisfied both problems and
non-negative conditions (x , y ≥ 0) that solution would be feasible solution.
6. Basic Feasible Solution : Any solution to a general linear programming problems (LPP) which satisfy is the non-
negative conditions of the problem is called basic feasible solution.
7. Optimal Solution : Any feasible solution which optimizes ( Maximizes and Minimizes ) the objective functions of a
general linear programming problems is called an optimal solution.
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Q - 3 : Why do we use linear programming ? 19
Linear programming is useful for solving inequalities. Linear programming is considered as an important technique that is used to find the
optimum resources utilization. There are alternative uses of the resources such as money, manpower, material, machine and other facilities .
Main advantages of linear programing problem are –
a) Linear programming techniques improve the quality of decisions. User’s of this technique become more objective and less subjective.
b) Linear programming provides possible and practical solution programming provide possible and practical solution. Since they a re
might be other constraints operating outside of the problem which must be taken into account.
c) Linear programming helps in attaining the optimum use of productive factors. It also indicates how a decision maker can employ his
productive factors effectively by selecting and distributing these elements.
Linear programming suffers from certain limitations which are given bellow :
1. Graphical Method : This method is suitable for problem with two decision variables. It involves plotting the constraints
on a graph and finding the feasible region.
2. Algebraic Method : This method for solving LPP involve the use of algebraic equations to find the optimal solution.
3. Simplex Method : It is an interactive algorithm that starts with a basic feasible solution and moves from one basic feasible
solution to another until the optimal solution is reached.
4. Transportation Problem : The transportation problem deals with the transportation of a product manufactured at
different factories (supply/origin) to a number of different warehouses (demand/destination).
1) Resource allocation : It can help business allocating their resources in the most effective way possible.
2) Supply chain management : It can be used to optimize supply-chain management by determining the most efficient
transportation routs.
3) Production planning : It can help businesses determining the optimal production mix, taking into account factors.
4) Marketing & Advertising : It can be used to optimize marketing and advertising campaigns by determining the most effective
mix of marketing channels and advertising media.
5) Financial Planning : It can be used to optimize financial planning such as portfolio optimization, assets allocation and risk
management.
6) Decision making : It provides a structured framework for making complex decisions.
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PRIMAL DuAL
1. Primal : The first way of stating a linear programing problem is called the primal of the problem.
2. Dual (Duality) : The second way of stating linear programing problem is called the dual. The variables of the dual linear
programming problem also known as dual variables have important economic interpretations which can be used by a decision
maker for planning his resources.
Under certain circumstances the dual problem is easier to solve than the primal problem. The solution of the dual problem leads
to the solution of the primal problem and thus efficient computational techniques can be developed through the concept of duality.
3. What are the steps for formulating a dual problem ? ( Dual Formulation Procedures ) 20
Step – 1 : If the primal maximization the dual is minimization and vice versa.
Step – 2 : The right-hand-side values of the primal constraints become the dual objective function co-efficient.
Step – 3 : The primal objective function co-efficient become the right-hand-side values of the dual constraints.
Step – 4 : The transpose of the primal constraints co-efficient becomes the dual constraints.
Step – 5 : Constraints inequality signs are reversed.
In the dual LPP, the right-hand-side quantity of the primal constraints becomes a dual objective function. The total opportunity cost that is
to be minimized will be represented by the function.
gAMe theoRy
1. Meaning Of Game : The term ‘game’ represents a conflict between two or more parties i.e.,
1) Two person game ;
2) n person game ;
3) Zero-sum game ;
4) Non-zero sum game ;
5) Constant sum game ;
6) Co-operative game.
2. Rules of game : Game theory is applicable to situation that satisfy the following conditions :
1) The number of competitors is finite.
2) The players act rationally and intelligently.
3) Each player has available to him a finite set of possible courses of action.
4) There is a conflict of interests between the participants.
5) The players make individual decisions without directly communicating.
6) The rules governing the choice are specified and known to the players.
7) The players simultaneously select their respective courses of action.
8) The pay-off is fixed and determined in advanced.
3. Strategy : A strategy for a player has been defined as a set of rules or alternative courses of action available to him in
advance by which player decides the courses of action that he should adopt.
(a) Pure Strategy : If the player select the same strategy each time, them it is referred to as pure strategy.
(b) Mixed Strategy : When the players use a combination of strategies and each player always keep guessing as to
which course of action to be selected by the other players at a particular occasion, this is known as mixed strategy.
(c) Optimum Strategy : A course of action on play which puts the player in the most preferred position, irrespective
of the strategy of his competitors is called an optimum strategy.
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4. Value of Game : It is expected pay-off of play when all the players of the game follow their optimum strategies, the game
is called fair, if the value of the game is zero and unfair if it is non-zero.
5. Two person zero-sum game : When there are two competitor playing a game, it is called two person game. If the number
of competitors are n, it is known as n person game. There are two types of two person zero-sum games.
In one the most preferred position is achieved by adopting a single strategy and therefore the game is known as the pure
strategy game.
The second types required the adoption by both players a combination of different strategies in order to achieve the most
preferred position and is therefore referred to as the mixed strategy game.
6. Pay-off matrix : The matrix which shows the outcome of the game as the players select their particular strategies, is
known as the pay-off matrix. A two person zero-sum game is conveniently represented by a matrix as shows below –
Let player ‘A’ have m course of actions ( A1, A2,... , Am ) and player ‘B’ has n courses of action ( B1, B2, …,Bn ) the total numbe
of outcomes is ( m ✕ n ).
As pay-off matrix –
7. Determination of saddle point : Following are the three steps to determine the saddle point in the pay-off matrix :
Step – 1 : Select the minimum (lowest) element in each row of the pay-off matrix and write them under the row
minima heading. Then select the maximax (largest) element among these elements and enclose it in a rectangle.
Step – 2 : Select the maximum (largest) in each column of the pay-off matrix and write under column maxima
heading. Then select the smallest elements (maximin) among these elements and enclose it in a circle.
Step – 3 : Find out the element(s) which is same in the circle as well as rectangle and mark the position of such
element(s) in the matrix the element represents the value of the game and called the saddle point.
8. Principles of Dominance :
In general the following rules (principles) of dominance are used to reduce the size of pay-off matrix :
Rule – 01 : If all the elements in a row (say ith row) of a pay-off matrix are less than or equal to the corresponding elements
of the other row (say jth row) then the player-A will never choose the ith strategy is dominated by the jth strategy.
Rule – 02 : If all the elements in a column (say rth column) of a pay-off matrix are greater than or equal to the corresponding
elements of the other column (say sth column) then the player B will never choose the rth strategy is dominated by the sth strategy.
Rule – 03 : A pure strategy may be dominated if it is inferior to average of two more other pure strategy.
The transportation problem deals with the transportation of a product manufactured at different factories (supply) to a number of
different warehouse (demand). The total supply available at the origin and the total quantity demanded by the destinations are
given in the statement of the problem.
Q – 04 : What are the different types of methods for finding an initial solution ?
North-west corner method, the largest possible allocation is made to the cell in the upper left-hand corner of the table, followed
by allocations to adjacent feasible cell. The third allocation is made in the same way as the second allocation. The only feasible
cell adjacent to cell 2A is cell 2B.
Step –1 : Select the north-west (upper left hand) corner cell of the table transportation table and allocate as many units as
possible using equal to demand and supply.
Step – 2 : Adjust the supply and demand number in the respective rows and columns allocation.
Step – 3 :
(a) If the supply for the first row is satisfied, then move down the 1st cell of the 2nd row and go to Step-2.
(b) If the demand for the 1st column is satisfied, then move horizontally to the next cell in the 2nd column and 1st
row and go to step - 2.
Step – 4 : If for any cell, supply = demand, then the next allocation can be made is cell either in the next column/row.
Step – 5 : Continues the procedure until the total available quantity is fully allocated in the cells.
(i) Balance TP : When both supplies and demands are equal then the problem is said to be a balanced transportation
problem.
(ii) Unbalanced TP : When the supply and demand are not equal, it said to be an unbalanced transportation problem. In
this type of problem, either a dummy row or a dummy column is added according to requirement to make it a balanced
problem. Then it can be solved similar to the balance problem.
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QueuINg theoRy
Q – 01 : What is a queue ? 19
The word ‘queue’ refers to customers waiting for service in a line. It may be a physical line of customers. Queue or waiting lines
are very common in everyday life. For example, customers wait for service in front of railway booking offices, post offices, bank
counters, doctor clinics, bus stops etc.
The queuing process is a quantitative technique useful for determining the optimum number of service facilities. The objective of
these models is to determine an optimum number of personnel or facilities to service customers, balancing the cost of service
with the cost of waiting or congestion.
1) Input process : This element is concerned with the pattern in which the customers arrive and join the system. An input
source is characterized by :
a) its size,
b) arrival time distribution of customers,
c) mean time between intervals, and
d) attitude of the customers.
2) Service mechanism : The service mechanism is concerned with service time and service facilities. Service time is the
time interval from the commencement of service to the completion of service.
3) Queue discipline : Queue discipline refers to the order in which the service station selects the customers from the
waiting line. This is called the ‘First come First served’ service discipline.
4) Output of the queue : Generally, this factor is not important but in some cases it may influence the service/arrival rate.
Q – 06 : What are the symbols and notation of single channel queuing model ? 21
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Q – 07 : What are the operating characteristics of a queuing system ? 18
1. Queue length : Probability distribution of queue length can be obtained with the help of the given probability distribution
of the arrival and service process. A large queue indicates poor service facilities. On the other hand, small queue indicates
excess of service facilities.
2. Waiting time in queue : It refers to the time spent by a customer in the queue before the commencement of his service.
Long waiting times may increase the customer’s dissatisfaction and potential loss of future revenues.
3. Waiting time in system : This is the total time spent by a customer in the queue plus service time. Long waiting time
may indicates need for a change in priority rules.
1. Queuing theory provides models that are capable of determining arrival pattern of customers or most appropriate number of service
stations.
2. Queuing models are helpful in creating balance between the two opportunity costs for optimization of waiting costs and service costs.
3. Queuing theory provides better understanding of waiting line so as to develop adequate service with tolerable waiting.
1. Most of the Kim models are very complex and cannot be easily understood.
2. If the assumption of ‘First come first served' is not a true one. ( and this happens in many cases ) queuing analysis becomes more complex.
3. In many cases, the observed distributions of service times and time between arrival cannot be fitted in the mathematical distributions
usually assumed in queuing models.
cIRcLe
Circle :Circle is the locus of a point which moves in such a way that its distance from a fixed point always remains constant.
Radius : The radius of a circle is the distance from the center of the circle to any point on its edge. It is half the length of the
diameter. The radius is often denoted by the letter r or a.
Diameter : The diameter of a circle is the length of a straight line that passes through the center of the circle and touches two
points on its edge. It is twice the length of the radius. The diameter is often denoted by the letter **d**, and the relationship
between diameter and radius is given by : d =
The equation of a circle whose centre is the point ( h, k ) and whose radius is ‘a’. (CT – 22)
a y–k
C x – h. B
Here,
AB = 𝑦 – 𝑘
BC = 𝑥 – ℎ
𝑎𝑛𝑑 CP = 𝑎
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∴ (𝑥 − ℎ)2 + (𝑦 − 𝑘)2 = 𝑎2
⟹ 𝑥 2 − 2ℎ𝑥 + ℎ2 + 𝑦 2 − 2𝑘𝑦 + 𝑘 2 − 𝑎2 = 0
⟹ 𝑥 2 + 𝑦 2 − 2ℎ𝑥 − 2𝑘𝑦 + ℎ2 + 𝑘 2 − 𝑎2 = 0
Assume,
ℎ = −𝑔
𝑘 = −𝑓
ℎ2 + 𝑘2 − 𝑎2 = 𝑐