In this article, we will learn how to **calculate shadow price linear programming **in **Excel**. The **Shadow Price** is the change in the value of the **objective function** per unit increase in the constraint. It is a very important tool for financial calculations. In industry, we need to know these parameters before producing products. We can easily do this task in Excel. So, without any delay, letâ€™s start the discussion.

**Table of Contents**hide

## Download Practice Workbook

To practice by yourself, download the following workbook.

## Step-by-Step Procedures to Calculate Shadow Price Linear Programming in Excel

To demonstrate the method, we have taken the following dataset. The dataset contains information on a **wood shop** where **Wooden Sofas** and **Wooden Beds** are made. The shop gets **200** and **300**$ benefits per Sofa and Bed respectively. But, there are some **constraints**. From this dataset, we will find out the maximum profit. After that, we will calculate the **shadow price** with **linear programming**.

Letâ€™s follow the steps below to learn the method.

### STEP 1: Prepare Dataset

First, we need to prepare our dataset with some modifications to solve the problem. We will link up between cells using the formulas.

- Firstly, we have to insert the formula of total profit.
- To do so, write down the following formula in the
**E6**cell:

`=(C6*C5)+(D6*D5)`

- Then, press
**Enter**to get the result. - Now, it is showing
**0**. - But after solving this, we will get the maximum profit in this cell.

- Now, write down the following formula in the
**E7**cell:

`=C7*C5+D7*D5`

- Then, press
**Enter**to proceed. - From this cell, we will get the
**LHS**(Left Hand Side) of a constraint.

- Now, write down the following formula in the
**E7**cell:

`=C8*C5+D8*D5`

- Then, press
**Enter**to proceed. - From this cell, we will get the
**LHS**(Left Hand Side) of another constraint.

- Now, write down the following formula in the
**E7**cell:

`=C9*C5+D9*D5`

- Then, press
**Enter**to proceed. - From this cell, we will get the
**LHS**(Left Hand Side) of another constraint.

**Total Profit**which is our

**objective functio**n comes from the

**summation**of profits of wooden

**sofas**and

**beds**. The total profit of wooden sofas comes from the

**multiplication**of profit per sofa and the number of sofas. Similarly, we can get the profit of the wooden bed by

**multiplication**. After summation of these

**2**, we can get the total profit. By using the same

**formula**, we have calculated the

**LHS**for these

**constraints**depending on the number of

**sofas**and

**beds**of the constraints.

**Read More: ****How to Solve Integer Linear Programming in Excel (With Easy Steps)**

### STEP 2: Use Solver Feature to Calculate Shadow Price Linear Programming

In this step, we will insert the **Solver Feature **to **maximize** the objective function. As the by-product of maximization, we will get the **shadow price**.

- Now, we will add a
**solver**in**Excel**to solve the data. - To do so, click on
**Data**>>**Solver**to add the solver.

- Instantly, you can see a window named
**Solved Parameters.** - Then, we will insert parameters into this window.
- So, write
**$E$6**in the**Set ObjectiveÂ**field. - Here, the
**E6**cell indicates the profit of the shop. - After that, in the
**By Changing Variable Cells**field, write down**$C$5:$D$5.** - Here, these
**2**cells are variables. - Then, click on the
**AddÂ**button.

- As a result, the
**Add constraint**window will come out. - After that, write according to the following figure.
- In the
**Cell Reference**field, write**$E$7:$E$9.** - And, in the
**Constraint**field, write**$G$7:$G$9.** - Here, we have declared the constraints.
- Then, press
**OK**to proceed.

- In this step, we will select the solving method.
- So, from the drop-down menu of the
**Select a solving method**, select**Simplex LP**. - Then, press
**Solve**to solve the problem.

- Instantly, you can see a
**Solver ResultsÂ**window. - Now, in the
**Reports**field, select**Answer and Sensitivity**and press**OK**.

**Read More: ****How to Use Excel Solver for Linear Programming (With Easy Steps)**

### STEP 3: Get Answer & Sensitivity Report

We will get **2** Excel Sheets of **Answer** and **Sensitivity** reports automatically. From these reports, we will extract our desired information.

- Now, you can observe the solution.
- Here, you can see the number of
**Wooden sofas**and**Wooden Beds**for maximum profit. - And, you can watch the total benefit is
**107500**$.

- In the Excel workbook,
**2**worksheets have appeared. - First, go to
**Answer Report 1**. - In this report, you can observe the
**Final Value**. - Here, the
**Final Value**means the maximum profit of the shop after maximization. - And, the
**Cell Value**is representing the**LHS**value of the**problem constraint**.

**Machine 2 LHS**and

**Labor LHS**are binding or limited by the

**optimization model**as

**Slack**is

**0**. For this reason, if you change these values, then, the optimization parameters will be changed, and maximum optimization will change. So, it will have a

**shadow price**. But,

**Machine 1 LHS**is not binding, so it will not have any

**shadow price**.

- After that, go to
**Sensitivity Report 1**. - Then, look for the
**Shadow PriceÂ**column. - Here, the
**Shadow Price**is the change in the value of the**objective function**per unit increase in the constraintâ€™s bound. - As
**Machine 1 LHS**is not binding, it has not any**shadow price**.

**Read More: ****How to Do Linear Programming with Sensitivity Analysis in Excel**

## Practice Section

There is a practice **Excel Sheet** available. You can practise from this sheet.

## Conclusion

In this article, we have demonstrated** how to calculate shadow price linear programming in Excel**. There is a practice workbook at the beginning of the article. Go ahead and give it a try. To read similar articles, check out **the ExcelDemy website**. Last but not least, please use the **comment section** below to post any questions or make any suggestions you might have.