Comments

    • Profile photo of John Moffat says

      The shadow price is the most extra that you would be prepared to pay for one extra unit of the limited resource.
      It is calculated by taking one extra unit and calculating the extra contribution that would be earned.
      If there is slack demand, it means that we are already producing less than the limit, so even if the limit on demand was increase by 1 to 11, we couldn’t produce any more and therefore could not make any more contribution.

  1. avatar says

    This lecture keeps stopping after 7 mins and will not play any further. I have watched the previous lectures with no issues.
    I have updated my flash player and cleared the history/cache etc and still stops at 7 mins – any ideas on what else I need to do – to be able to watch the lectures.

    Thanks
    Shelley

  2. avatar says

    Hi Sir,

    About shadow pricing, How the extra contribution is regarded wholly to the cost? If the contribution is in whole becoming the cost, there is no point to stretch the additional constraint. Because the benefit all becomes the cost.

    • Profile photo of John Moffat says

      What you say is true.
      That is why the shadow price is the most extra we are prepared to pay for one extra unit of the limited resource.
      So…..provided we can get it for less then it is worth having (because the total contribution will increase).

Leave a Reply