What are opportunity costs?

Created by Steve Hoover, Modified on Sun, Jan 14 at 11:46 AM by Steve Hoover

If you impose a constraint, the software will tell you what you have to gain (if anything) by relaxing that constraint by a single unit.


Suppose you set an advertising constraint of $900K, and the opportunity cost (also known as the shadow price) is $2.1: what that means is that if you were to spend $901K instead of $900K, you would make $2,100 more profit (after accounting for the additional spending).


Such information is often very useful in justifying budget adjustments.

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