exercise 19.5 BPP revision kit.

This topic has 1 reply, 2 voices, and was last updated 11 years ago by John Moffat.

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November 25, 2014 at 8:28 pm #213230
Esther
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Hello John,

I dont understand why the company will increase the profit if they buy material X at extra price.

Thanks
Esther
November 26, 2014 at 10:13 am #213352
John Moffat
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The most you will be prepared to pay for a limited resource is the current cost plus the shadow price. If you can buy for less than this total then it is worth buying and the profit will be higher.

(The lecture on linear programming will help you here where I explain shadow prices)
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