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(C) Suppose that the shadow price of the medium yarn demand con- straint is $12.30, with an allowable increase of 5388. Recall that the shadow

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(C) Suppose that the shadow price of the medium yarn demand con- straint is $12.30, with an allowable increase of 5388. Recall that the shadow price is the amount that the objective increases per unit in- crease in the right hand side of the constraint. So a shadow price of $12.30 for the medium yarn demand constraint means that the cost increases by $12.30 for every unit increase in the medium yarn de- mand. The allowable increase of 5388 means that this shadow price hold up to an increase of 5388 in the right hand side of this con- straint. If we increase the right hand side by more than 5388, the shadow price will change, and it is impossible to know how it changes without resolving the model. A new client is interested in purchasing up to 5,000 kg/month of medium size yarn. What is the minimum price per kg of yarn that Filatoi Riuniti should quote to this new client? (In answering this question, assume that Filatoi has not decided to increase its spinning machine capacity, and that Filatoi does not want to change the prices that they currently charge their existing clients.) Now suppose that the client wants to purchase 6,000 kg/month of medium size yarn. Now what is the minimum price per kg of yarn that Filatoi Riuniti should quote to this new client? (In answering this question, assume that Filatoi has not decided to increase its spinning machine capacity, and that Filatoi does not want to change the prices that they currently charge their existing clients.)

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