Explain the economic interpretation of dual variables.
Answers
Answer:
The linear programming problem can be viewed as a resource allocation model in which the objective is to maximize revenue subject to the availability of limited re-sources. Looking at the problem from this standpoint, the associated dual problem of-fers interesting economic interpretations of the LP resource allocation model.
To formalize the discussion, we consider the following representation of the gen-eral primal and dual problems:
Viewed as a resource allocation model, the primal problem has neconomic activities and mresources. The coefficient Cj in the primal represents the revenue per unit ofactivity j. Resource i, whose maximum availability is bi , is consumed at the rate aij units per unit of activity j.
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