Posted by sunita on September 16, 19100 at 23:22:18:
In Reply to: Re: Negative sign in shadow price posted by Gopala Tumuluri on September 27, 1998 at 23:26:30:
:
: : What does the negative sign in shadow price mean?
: : Does it means that if we increase slack variable by x units the cost/profit (whatever we were maximizing) will decrease (?) by Shadow Price * x?
: so , for a maximizing profit function, a -ve sp would indicate decrease in profit, with corresponding increase in slack variable.
: Shadow price tells you the direction and the magnitude of the change the objective will experience when the corresponding slack variable is INCREASED (remember the shadow price considers positive deltas).
: For a cost minimization problem, a negative shadow price means that an increase in the corresponding slack variable results in a decreased cost. If the slack variable decreases then it results in an increased cost (because negative times negative results in a positive).
: The magnitude of the change is given by the value of the shadow price. The sign gives the direction of the change.
: Can anyone correct me or add something to what I said?
: Thanks
: Gopala