Shadow Price

Shadow price is a concept from optimization that measures the value or benefit of obtaining one additional unit of a resource that is limited or constrained. It indicates how much the overall objective (like profit or efficiency) would improve if the resource constraint were relaxed by one unit. For example, if a factory has a limited amount of raw material, the shadow price shows how much more profit could be achieved if more raw material were available. It helps decision-makers understand the worth of freeing up scarce resources in terms of overall goals.