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Hi,
I’m struggling to understand the difference between constraints and binding constraints in relation to linear programming.
From past exam papers I am seeing that only binding constraints have a shadow prices but cannot get the logic behind it.
Any insights would be wonderful!
Thank you!Binding Constraints: In the context of linear programming problems, binding constraints are those certain limitations which cause immense changes in optimal and feasible solution due to some variation and hence, tighten the criteria of feasibility.
Non-Binding Constraints: These are the limitations which would not result in changes or alteration in optimal solution or area of feasibility due to variation in the constraint. These constraints do not influence the optimality under linear programming problem.
Shadow price refers to the variation in optimal solution due to alteration in a single unit of constraint.
An example is the cost of paying overtime to employees to stay on the job and operate a production line for one more hour. Thus, if the result of keeping the production line running longer (the shadow price) exceeds the cost required to run the line, management should do so.
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