Shadow Price Calculator

Formula

The formula to calculate the Shadow Price (SP) is:

\[ SP = V(f+1) - V(f) \]

Where:

(SP) is the Shadow Price ($)
(V(f+1)) is the value of objective function with one more unit ($)
(V(f)) is the value of original objective function ($)

What is a Shadow Price?

The Shadow Price is the change in the value of the objective function of an optimization problem when an additional unit of a resource is added. It represents the marginal value of the resource in the context of the optimization problem.

Example Calculation

Let's assume the following values:

Value of Objective Function with One More Unit (V(f+1)) = $1500
Value of Original Objective Function (V(f)) = $1400

Using the formula:

\[ SP = 1500 - 1400 = 100 \]

The Shadow Price (SP) is $100.