Explain and justify why a manager would be interested in kno

Explain and justify why a manager would be interested in knowing the Dual Price (or Shadow Price) from a linear programming problem.

Solution

The Dual Price provides important economical interpretation such as shadow prices, i.e., the marginal values of the elements. The shadow price was defined as the improvement in the objective function value per unit increase in the right hand side, because the problem was often put in the form of profit maximization improvement (meaning increase). The shadow price may not be the market price. The shadow price is e.g., the worth of the resource under the \"shadow\" of your business activity.One can do Sensitivity analysis, i.e., the analysis of the effect of small variations in system parameters on the output measures can be studied by computing the derivatives of the output measures with respect to the parameter.