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- This topic has 2 replies, 3 voices, and was last updated 13 years ago by amrita.

- AuthorPosts
- December 12, 2010 at 2:22 am #46915
there r around 4 to 5 constraints in a question

for instance

labour – 4s + 2b = 26000

(i)

material 5s + 2b = 30000

(ii)

s= 6000—-(iii)

etc etc

calculate shadow price for labourso we ll take 2 equations, labour for sure

which will be the second one?

coz answer as to contribution is different on using both 2nd and 3rd equations

so value of s and b by using i and ii will be different and by using i and iii will be differentplease advise

December 12, 2010 at 3:26 am #74480Why do you need a second equation. For Shadow pricing you will write the

Labour equation as : 4s + 2b = 26001

Now you have the value of s, just substitute it in the above equation. 4×6000 +2b =26001

Now you will get the value of b, Substitute this value of b and s in the objective function/maximize contribution equation, and you will get a new contribution,

Then all you have to do is compare this contribution with the contribution at the optimum level of prodution, the difference will be The Shadow Price for 1 extra unit of labour.December 12, 2010 at 10:48 am #74481or u could calculate the shadow price by simultaneous equations..

where 4s+2b=26001

5s+2b= 30000…

solve the equations to get s and b..

then get the contribution of the above units.. and compare it with the contribution of the previous units, that will give u your shadow price. - AuthorPosts

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