Explain graphically how to determine the shadow price of a binding constraint in an LP with...

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Advance Math

Explain graphically how to determine the shadow price of abinding constraint in an LP with two variables. Show also theformulation of your LP.
In the context of network models, briefly explain what a flowbalance constraint is and write down one example for a network ofyour own choice.
Develop your own objective function and set of constraints foran LP with unbounded feasible region but finite optimal solution.Illustrate graphically.

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SolutionThe Shadow Price ofa constraint in Linear Programming indicates howmuch the value of an objective optimal function changes due to amarginal variation in the righthand side of a constraint It isassumed that the rest of the models parameters remain constant Itshould be noted beforehand that the Shadow Price can bepositive zeroor negativeComputational tools likeExcels Solver can be used for obtaining theSensibility Analysis from a Linear Programmingmodel however here we will be focusing on calculating the ShadowPrice of a constraint graphically which will help us later on tounderstand the concepts behind the Solver resultsCalculate the Shadow Price of a Constraint GraphicallyWe will now calculate the ShadowPrice of a constraint for the following Linear ProgrammingmodelThe optimal solution of this modelis See Answer

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