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Nonlinear Programming

This document presents three nonlinear optimization problems: 1) A company produces two products and wants to determine optimal prices to maximize profit. The demand for each product depends on both prices. 2) A department produces two products and wants to determine the optimal quantities to maximize profit, given selling prices and variable costs that depend on quantities. 3) A power company sells electricity at different prices for high- and low-demand hours. It wants to determine optimal prices to maximize profit, given demand functions that depend on both prices.

Uploaded by

Kristen Obrien
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© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online on Scribd
320 views

Nonlinear Programming

This document presents three nonlinear optimization problems: 1) A company produces two products and wants to determine optimal prices to maximize profit. The demand for each product depends on both prices. 2) A department produces two products and wants to determine the optimal quantities to maximize profit, given selling prices and variable costs that depend on quantities. 3) A power company sells electricity at different prices for high- and low-demand hours. It wants to determine optimal prices to maximize profit, given demand functions that depend on both prices.

Uploaded by

Kristen Obrien
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online on Scribd
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NONLINEAR OPTIMIZATION

1) Ashworth Industries would like to make a price and production decision on two of its products. Define QA and QB as the quantities of products A and B to produce and PA and PB as the price for products A and B. The weekly quantities of A and B that are sold are functions of the prices, according to the following expressions:

QA 5500 200 PA 50 PB QB 4500 225PB 100 PA


The fixed cost and the variable cost for product A are RM2,000 and RM18 per unit. The fixed cost and the variable cost for product B are RM1,000 and RM12 per unit. a) Ashworth Industries normally priced the products at RM25 and RM20 for product A and B, respectively. Determine number of products will be sold and gross profit with this pricing policy. b) Formulate an expression for gross profit as a function of the selling prices for the two products. c) i) Calculate the optimal prices for Ashworth Industries to charge. ii) Determine units of each products will be sold and the gross profit based on answer in c(i).

2) The variable cost to produce each of two products (c1, c2 ) is dependent on the quantity of each product ( x1 , x2 ) that is produced:

c1 x1 x2 c2 2 x2 x1
The manager of the department wants to determine the quantity of each product to produce in order to maximize profits. Product 1 sells for RM 10,000 a unit, and product 2 sells for RM 12,000 a unit. Fixed cost is RM 2,000 for each product. a) Let x1 2000 and x2 500 . Determine the variable cost for each product and gross profit. b) Formulate an expression for gross profit as a function of the quantity of each product. c) i) ii) Calculate the optimal quantity. Determine variable cost of each product and the gross profit based on answer in c(i).

NONLINEAR OPTIMIZATION
3) The demand (in millions of kWh) in Blue Ridge Power Company for power from its customers for high-demand ( qh ) hours and low-demand ( ql ) hours is determined by the following formulas:

qh 5.8 0.06 ph 0.005 pl ql 3.0 0.11 pl 0.008 ph

pl equals the price per kilowatt-hour during low demand hours, and ph is the price
per kilowatt-hour during high demand hours. The variable costs per kilowatt-hour for off-peak (low demand) and peak (high demand) are RM 1.3 and RM 1.5 respectively. a) Assume ph RM 40 and pl RM 15 . Determine the demands and gross profit. b) Formulate an expression for gross profit as a function of the selling prices.

c) i) ii) Calculate the optimal prices. Determine demands and the gross profit based on answer in c(i).

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