Which of the following is true about Shadow Price? (Choose ALL the true statemen

Question

Which of the following is true about Shadow Price? (Choose ALL the true statements. Choosing false statements will incur negative marking.) Shadow price deals with change in the optimal profit when there is a change in the constraint. If Shadow Price is negative, it means that the profit will increase if the right hand side (RHS) of the constraint increases. If Shadow Price is positive, it means that the profit will decrease if the right hand side (RHS) of the constraint increases. If Shadow Price is positive, it means that the profit will decrease if the right hand side (RHS) of the constraint decreases. If Shadow Price is negative, it means that the profit will decrease if the right hand side (RHS) of the constraint increases. Shadow price deals with change in the decision variables when there is a change in the constraint. If Shadow Price is positive, it means that the profit will increase if the right hand side (RHS) of the constraint increases. If Shadow Price is positive, it means that the profit will increase if the right hand side (RHS) of the constraint decreases.

Explanation / Answer

Solution:

The following statements are TRUE:

-If Shadow Price is positive, it means that the profit will decrease if the right hand side (RHS) of the constraint decreases

-Shadow price deals with change in the decision variables when there is a change in the constraint

-If Shadow Price is positive, it means that the profit will increase if the right hand side (RHS) of the constraint increases

-Shadow price deals with change in the optimal profit when there is a change in the constraint.

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