CHAPTER THREE

ECONOMIC OPTIMIZATION
Objective
 Explain the meaning and types of optimization problems.
 Examine the relationship between marginal analysis and differential calculus.
 Find optimal solutions using calculus to many kinds of maximization and minimization
problems in managerial economics.
 Solve the constrained optimization problems using Lagrangian multiplier techniques.

1.1. Introduction
Effective managerial decision making is the process of arriving at the best solution to a problem.
If only one solution is possible, then no decision problem exists. When alternative courses of
action are available, the best decision is the one that produces a result most consistent with
managerial objectives. The process of arriving at the best managerial decision is the goal of
economic optimization and the focus of managerial economics.
Normative economic decision analysis involves determining the action that best achieves a
desired goal or objective. This means finding the action that optimizes (i.e., maximizes or
minimizes) the value of an objective function. For example, in a price-output decision-making
problem, we may be interested in determining the output level that maximizes profits. In a
production problem, the goal may be to find the combination of inputs (resources) that
minimizes the cost of producing a desired level of output. In a capital budgeting problem, the
objective may be to select those projects that maximize the net present value of the investments
chosen. There are many techniques for solving optimization problems such as these.
Optimization techniques are a powerful set of tools that are important in efficiently managing a
firm’s resources and thereby maximizing shareholder wealth.

1.2. Types of Optimization Techniques

The basic form of the problem in decision making is to identify the alternative means of
achieving a given objective and then to select the alternative that accomplishes the objective in

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the most efficient manner, subject to constraints on the means. In programming terminology, the
problem is optimizing the value of some objective function, subject to any resource and/or other
constraints such as legal, input, environmental, and behavioural restrictions. Mathematically, we
can represent the problem as

…………………………………………….…………Equation 2.1

…………………………….Equation 2.2
where Equation 2.1 is the objective function and Equation 2.2 constitutes the set of constraints
imposed on the solution. The xi variables, x1, x2, . . ., xn, represent the set of decision variables,
and y f(x1, x2, . . ., xn) is the objective function expressed in terms of these decision variables.
Depending on the nature of the problem, the term optimize means either maximize or minimize
the value of the objective function. As indicated in Equation 2.2, each constraint can take the
form of an equality (=) or an inequality (≤ or ≥) relationship.
 Complicating Factors in Optimization
The following are several factors that can make optimization problems fairly complex and
difficult to solve.
 The existence of multiple decision variables in a problem
Relatively simple procedures exist for determining the profit-maximizing output level for the
single-product firm. However, the typical medium- or large-size firm often produces a large
number of different products, and as a result, the profit maximization problem for such a firm
requires a series of output decisions-one for each product.
 The complex nature of the relationships between the decision variables and the
associated outcome
For example, in public policy decisions, on government spending for such items as education, it
is extremely difficult to determine the relationship between a given expenditure and the benefits
of increased income, employment, and productivity it provides. No simple relationship exists
among the variables. Many of the optimization techniques discussed here are only applicable to
situations in which a relatively simple function or relationship can be postulated between the
decision variables and the outcome variable.
 The possible existence of one or more complex constraints on the decision variables
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For example, virtually every organization has constraints imposed on its decision variables by
the limited resources-such as capital, personnel, and facilities- over which it has control. These
constraints must be incorporated into the decision problem. Otherwise, the optimization
techniques that are applied to the problem may yield a solution that is unacceptable from a
practical standpoint.
 The presence of uncertainty or risk
The presence of uncertainty or risk illustrates the difficulties that may be encountered and may
render a problem unsolvable by formal optimization procedures.
The mathematical techniques used to solve an optimization problem represented by Equations
2.1 and 2.2 depend on the form of the criterion and constraint functions. The simplest situation to
be considered is the unconstrained optimization problem. In such a problem no constraints are
imposed on the decision variables, and differential calculus can be used to analyze them.
Another relatively simple form of the general optimization problem is the case in which all the
constraints of the problem can be expressed as equality (=) relationships. The technique of
Lagrangian multipliers can be used to find the optimal solution to many of these problems.
Often, however, the constraints in an economic decision-making problem take the form of
inequality relationships (≤ or ≥) rather than equalities. For example, limitations on the resources-
such as personnel and capital-of an organization place an upper bound or budget ceiling on the
quantity of these resources that can be employed in maximizing (or minimizing) the objective
function. With this type of constraint, all of a given resource need not be used in an optimal
solution to the problem. An example of a lower bound would be a loan agreement that requires a
firm to maintain a current ratio (that is, ratio of current assets to current liabilities) of at least
2.00. Any combination of current assets and current liabilities having a ratio greater than or equal
to 2.00 would meet the provisions of the loan agreement. Such optimization procedures as the
Lagrangian multiplier method are not suited to solving problems of this type efficiently;
however, modern mathematical programming techniques have been developed that can
efficiently solve several classes of problems with these inequality restrictions.
Linear-programming problems constitute the most important class for which efficient solution
techniques have been developed. In a linear-programming problem, both the objective and the
constraint relationships are expressed as linear functions of decision variables.

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Other classes of problems include integer programming problems, in which some (or all) of the
decision variables are required to take on integer values, and quadratic-programming problems,
in which the objective relationship is a quadratic function of the decision variables.
Generalized computing algorithms exist for solving optimization problems that meet these
requirements. The various types of optimization problems and techniques can, thus, be
represented as follows:

Figure 2.1. Optimization techniques

1.2.1. Differential Calculus and Multi-variate Optimization

Recall that in chapter 2, marginal analysis was introduced as one of the fundamental concepts of
economic decision making. In the marginal analysis framework, resource-allocation decisions
are made by comparing the marginal benefits of a change in the level of an activity with the
marginal costs of the change. A change should be made as long as the marginal benefits exceed
the marginal costs. By following this basic rule, resources can be allocated efficiently and profits
or shareholder wealth can be maximized.
In the profit-maximization, the application of the marginal analysis principles required that the
relationship between the objective (profit) and the decision variable (output level) be expressed
in either tabular or graphic form. This framework, however, can become cumbersome when
dealing with several decision variables or with complex relationships between the decision

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variables and the objective. When the relationship between the decision variables and criterion
can be expressed in algebraic form, the more powerful concepts of differential calculus can be
used to find optimal solutions to these problems

 Rules of Differentiation
These rules for differentiating functions are summarized in Table 2.1 below.
Table 2.1. Rules for differentiating functions

Example:
Rules of differentiation: profit maximization at Wolkite Power Co. (continued) As an example of
the application of these rules, consider again the profit function for Wolkite Power Co., given by
Equation below:
π = -40 + 140Q - 10Q2
In this example Q represents the X variable and π represents the Y variable; that is, π = f(Q). The
function f(Q) is the sum of three separate functions—a constant function, f1(Q) = -40, and two
power functions, f2(Q) = 140Q and f3(Q) = - 10Q2 . Therefore, applying the differentiation rules
yields

= 0 + 1* 140 * Q1-1 + 2*(-10)*Q2-1

= 140 – 20Q

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  Applications of Differential Calculus to Optimization Problems
The reason for studying the process of differentiation and the rules for differentiating functions is
that these methods can be used to find optimal solutions for many kinds of maximization and
minimization problems in managerial economics.

 Maximization Problem
As you recall from the discussion of marginal analysis, a necessary (but not sufficient) condition
for finding the maximum point on a curve (for example, maximum profits) is that the marginal
value or slope of the curve at this point must be equal to zero. We can now express this condition
within the framework of differential calculus. Because the derivative of a function measures the
slope or marginal value at any given point, an equivalent necessary condition for finding the
maximum value of a function Y = f(X) is that the derivative dY/dX at this point must be equal to
zero. This is known as the first-order condition for locating one or more maximum or minimum
points of an algebraic function.
Example: First-order condition: Profit maximization at Wolkite Power Co. (contd.)
Using the profit function

discussed earlier, we can illustrate how to find the profit-maximizing output level Q by means of
this condition. Setting the first derivative of this function (which was computed previously) to
zero, we obtain
dπ/ dQ = 140 – 20Q
0 = 140 – 20Q
Solving this equation for Q yields Q* = 7 units as the profit-maximizing output level. The profit
and first derivative functions and optimal solution are shown in Figure 2.4. As we can see,
profits are maximized at the point where the function is neither increasing nor decreasing; in
other words, where the slope (or first derivative) is equal to zero.

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 Figure 2.4. Profit and first derivative functions
 Second Derivatives and the Second-Order Condition
Setting the derivative of a function equal to zero and solving the resulting equation for the value
of the decision variable does not guarantee that the point will be obtained at which the function
takes on its maximum value. The slope of a U-shaped function will also be equal to zero at its
low point and the function will take on its minimum value at the given point. In other words,
setting the derivative to zero is only a necessary condition for finding the maximum value of a
function it is not a sufficient condition.
Another condition, known as the second-order condition, is required to determine whether a
point that has been determined from the first-order condition is either a maximum point or
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minimum point of the algebraic function. This situation is illustrated in Figure 2.5. At both points
A and B the slope of first order condition is either a maximum point or the function (first
derivative, dY/dX) is zero; however, only at point B does the function take on its maximum
value.

A test to see whether the marginal value is decreasing is to take the derivative of the marginal
value and check to see if it is negative at the given point on the function. In effect, we need
to find the derivative of the derivative-that is, the second derivative of the function-and then test
to see if it is less than zero. Formally, the second derivative of the function Y f(X) is written as
d2Y/dX2 and is found by applying the previously described differentiation rules to the first
derivative. A maximum point is obtained if the second derivative is negative; that is, d2Y/dX2 <0.
Example: Second-order condition: Profit maximization at Wolkite Power Co.(continued)
Returning to the profit-maximization example, the second derivative is obtained from the first
derivative as follows:
dπ/ dQ = 140 – 20Q
d2π/ dQ2 = 0 + 1* (– 20) Q1-1 = – 20
Because d2π/dQ2<0, we know that a maximum-profit point has been obtained. An opposite
condition holds for obtaining the point at which the function takes on a minimum value. Note
again in Figure 2.5 that the marginal value (slope) is continually increasing in the neighbourhood
of the minimum value (point A) of the Y (X) function. First the slope is negative up to the point
where dY/dX = 0, and thereafter the slope becomes positive. Therefore, we test to see if d2Y/dX2
>0 at the given point. A minimum point is obtained if the second derivative is positive; that is,
d2Y/dX2 >0.
 Minimization Problem
In some decision-making situations, cost minimization may be the objective. As in profit-
maximization problems, differential calculus can be used to locate the optimal points.
Example: Cost Minimization: MAA Garment factory
Suppose we are interested in determining the output level that minimizes average total costs for
MAA Garment factory, where the average total cost function might be approximated by the
following relationship (Q represents output):
C = 15 - .040Q + .000080Q2
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Differentiating C with respect to Q gives
dC/ dQ = - .040 + .000160Q
Setting this derivative equal to zero and solving for Q yields
0 = .040 + .000160Q
Q* = 250
Taking the second derivative, we obtain
d2C/ dQ2 = + .000160
Because the second derivative is positive, the output level of Q = 250 is indeed the value that
minimizes average total costs.

1.2.2. Partial Differentiation and Multi-variate Optimization

Until now we have examined the relationship between two variables only. For example, variable
Y (say, total revenue, total cost, or total profit) was assumed to be a function of or to depend on
only the value of variable X (total output or quantity). Most economic relationships, however,
involve more than two variables. For example, total revenue may be a function of or depend on
both output and advertising, total costs may depend on expenditures on both labour and capital,
and total profit on sales of commodities X and Y. Thus, it becomes important to determine the
marginal effect on the dependent variable, say, total profit, resulting from changes in the
quantities of each individual variable, say, the quantity sold of commodity X and commodity Y,
separately. These marginal effects are measured by the partial derivative, which is indicated by
the symbol ∂ (as compared to d for the derivative). The partial derivative of the dependent or
left-hand variable with respect to each of the independent or right-hand variables is found by the
same rules of differentiation presented earlier, except that all independent variables other than
the one with respect to which we are finding the partial derivative are held constant.
For example, suppose that the total profit (π) function of a firm depends on sales of commodities
X and Y as follows:
π =f (X,Y) =80X – 2X2– XY – 3Y2 +100Y ...........................................................Equation 2.12
To find the partial derivative of π with respect to X, ∂π/∂X, we hold Y constant and obtain
π = 80 -4XY - Y
This isolates the marginal effect on π from changes in the quantity sold of commodity X only
(i.e., while holding the quantity of commodity Y constant). Note that the derivative of the third
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term of the π function is –Y (since the implicit exponent of X is 1) and that Y is treated as a
constant. The fourth and the fifth terms of the π function drop out in the partial differentiation
because they contain no X term. Similarly, to isolate the marginal effect of a change of Y on π,
we hold X constant and obtain
π = – X – 6Y +100
We can visualize geometrically the concept of the partial derivative with a three dimensional
figure, with π on the vertical axis and with the X axis and the Y axis forming the (plane surface,
rather than the line) base of the figure. Then, ∂π/∂X measures the marginal effect of X on π, in the
cross section of the three dimensional figure along the X axis. Similarly, ∂π/∂Y examines the
marginal effect of Y on π in the cross section of the three-dimensional figure along the Y axis.
Note also that the value of ∂π/∂X depends also on the level at which Y is held constant. Similarly,
the value of ∂π/∂Y depends also on the level at which X is held constant. This is the reason that
the expression for the ∂π/∂X found above also contains a Y term, while ∂π/∂Y also has an X term.
 Maximizing a Multivariable Function
To maximize or minimize a multivariable function, we must set each partial derivative equal to
zero and solve the resulting set of simultaneous equations for the optimal value of the
independent or right-hand variables. For example, to maximize the total-profit function
(Equation 2.12, repeated below for ease of reference),
π =80X – 2X2– XY – 3Y2 +100Y……………………...………………………….Equation 2.12
We set ∂π/∂X and ∂π/∂Y (found earlier) equal to zero and solve for X and Y.
Specifically,
∂π/∂X = 80 - 4X - Y = 0
∂π/∂Y = - X – 6Y + 100 = 0
Multiplying the first of the above expressions by -6, rearranging the second, and adding, we get
–480 + 24X + 6Y = 0
100 – X – 6Y = 0
–380 + 23X =0
Therefore, X = 380/23 = 16.52. Substituting X = 16.52 into the first expression of the partial
derivative set equal to zero, and solving for Y, we get
80 – 4(16.52) – Y =0

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Therefore, Y = 80 – 66.08 = 13.92.
Thus, the firm maximizes π when it sells 16.52 units of commodity X and 13.92 units of
commodity Y. Substituting these values into the π function, we get the maximum total profit of
the firm of
π = 80(16.52) – 2(16.52)2 – (16.52)(13.92) – 3(13.92)2 +100(13.92) = $1,356.52

1.2.3. Constrained Optimization and Lagrangian Multiplier Techniques

Most organizations have constraints on their decision variables. The most obvious constraints,
and the easiest to quantify and incorporate into the analysis, are the limitations imposed by the
quantities of resources (such as capital, personnel, facilities, and raw materials) available to the
organization. Other more subjective constraints include legal, environmental, and behavioural
limitations on the decisions of the organization.
 Substitution Technique
When the constraints take the form of equality relationships, classical optimization procedures
can be used to solve the problem. Substitution method can be employed when the objective
function is subject to only one constraint equation of a relatively simple form, is to solve the
constraint equation for one of the decision variables and then substitute this expression into the
objective function. This procedure converts the original problem into an unconstrained
optimization problem, which can be solved using the calculus procedures developed. This
procedure can be clarified by examining its use in a constrained minimization problem.
Suppose a firm produces its product on two assembly lines and operates with the following total
cost function:
TC = $3X2 + $6Y2 – $1XY
where X represents the output produced on one assembly line and Y the production from the
second.
Management seeks to determine the least-cost combination of X and Y, subject to the constraint
that total output of the product is 20 units. The constrained optimization problem is
Minimize TC = $3X2 + $6Y2 – $1XY
subject to; X + Y = 20
Solving the constraint for X and substituting this value into the objective function results in X =
20 – Y and
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TC = $3(20 – Y)2 + $6Y2 – $1(20 – Y)Y
= $3(400 – 40Y + Y2) + $6Y2 – $1(20Y – Y2)…………………………………….Equation 2.13
= $1,200 – $120Y + $3Y2 + $6Y2 – $20Y + Y2
= $1,200 – $140Y + $10Y2
Now it is possible to treat Equation 2.13 as an unconstrained minimization problem. Solving it
requires taking the derivative of the total cost function, setting that derivative equal to zero, and
solving for the value of Y:
dTC/ dY = –$140 + $20Y = 0
20Y = 140
Y=7
A check of the sign of the second derivative evaluated at that point ensures that a minimum has
been located:
dTC/ dY = –$140 + $20Y
d2 TC/ dY2 = 20
Because the second derivative is positive, Y = 7 is indeed a minimum. Substituting 7 for Y in the
constraint equation allows one to determine the optimal quantity to be produced on assembly line
X:
X + 7 = 20
X = 13
Thus, production of 13 units of output on assembly line X and seven units on line Y is the least-
cost combination for manufacturing a total of 20 units of the firm’s product. The total cost of
producing that combination is
TC = $3(169) + $6(49) – $1(13 x 7)
= $507 + $294 – $91
= $710
 Lagrangian technique: Unfortunately, the substitution technique used in the preceding
section is not always feasible. Constraint conditions are sometimes too numerous or
complex for substitution to be used. In these cases, the technique of Lagrangian
multipliers can be used.

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The Lagrangian technique for solving constrained optimization problems is a method that calls
for optimizing a function that incorporates the original objective function and the constraint
conditions. This combined equation, called the Lagrangian function, is created in such a way that
when it is maximized or minimized the original objective function is also maximized or
minimized, and all constraints are satisfied.
A re-examination of the constrained minimization problem shown previously illustrates this
technique. Recall that the firm sought to minimize the function
TC = $3X2 + $6Y2 – $1XY, subject to the constraint that X + Y = 20. Rearrange the constraint to
bring all terms to the right of the equal sign: 0 = 20 – X – Y
This is always the first step in forming a Lagrangian expression. Multiplying this form of the
constraint by the unknown factor λ and adding the result to the original objective function creates
the Lagrangian expression:
LTC = $3X2 + $6Y2 – $1XY + λ (20 – X – Y)…………………………………….Equation 2.14
LTC is defined as the Lagrangian function for the constrained optimization problem under
consideration. Because it incorporates the constraint into the objective function, the Lagrangian
function can be treated as an unconstrained optimization problem. The solution to the
unconstrained Lagrangian problem is always identical to the solution of the original constrained
optimization problem.
To illustrate, consider the problem of minimizing the Lagrangian function constructed in
Equation 2.14. At a minimum point on a multivariate function, all partial derivatives must equal
zero. The partials of Equation 2.14 can be taken with respect to the three unknown variables, X,
Y, and λ, as follows:
∂ LTC/∂X = 6X – Y – λ
∂ LTC/∂Y = 12Y – X – λ and
∂ LTC/∂ λ = 20 – X – Y
Setting these three partials equal to zero results in a system of three equations and three
unknowns:
6X – Y – λ = 0……………………..…………………………………………..Equation 2.15
–X + 12Y – λ = 0…………………..……………………………………………..Equation 2.16
20 – X – Y = 0…………………………….……………………………………Equation 2.17

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Notice that Equation 2.17, the partial of the Lagrangian function with respect to λ, is the
constraint condition imposed on the original optimization problem. The Lagrangian function is
constructed so that the derivative of the function taken with respect to the Lagrangian multiplier,
λ, always gives the original constraint. So long as this derivative is zero, as it must be at a local
extreme (maximum or minimum), the constraint conditions imposed on the original problem are
met.
Further, because the last term in the Lagrangian expression must equal zero (0 = 20 – X– Y), the
Lagrangian function reduces to the original objective function, and the solution to the
unconstrained Lagrangian problem is always the solution to the original constrained optimization
problem. Completing the analysis for the example illuminates these relations. To begin, it is
necessary to solve the system of equations to obtain optimal values of X and Y.
Subtracting Equation 2.16 from Equation 2.15 gives
7X – 13Y = 0………………………………………..……………………………Equation 2.18
Multiplying Equation 2.17 by 7 and adding Equation 2.18 to this product gives the solution for Y:
140 – 7X – 7Y = 0
7X – 13Y = 0
140 – 20Y = 0
140 = 20Y
Y=7
Substituting 7 for Y in Equation 2.17 yields X = 13, the value of X at the point where the
Lagrangian function is minimized. Because the solution of the Lagrangian function is also the
solution to the firm’s constrained optimization problem, 13 units from assembly line X and seven
units from line Y is the least cost combination of output that can be produced subject to the
constraint that total output must be 20 units. This is the same answer obtained previously, using
the substitution method. The Lagrangian technique is a more powerful technique for solving
constrained optimization problems than the substitution method; it is easier to apply with
multiple constraints, and it provides valuable supplementary information. This is because the
Lagrangian multiplier itself has an important economic interpretation. Substituting the values of
X and Y into Equation 2.15 gives the value of λ:
6 x 13 – 7 – λ = 0
λ = $71
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Here, λ is interpreted as the marginal cost of production at 20 units of output. It means that if the
firm were allowed to produce only 19 instead of 20 units of output, total costs would fall by
approximately $71. If the output requirement were 21 instead of 20 units, costs would increase
by roughly that amount. Because λ = $71 can be interpreted as the marginal cost of production,
an offer to purchase another unit of output for $100 is acceptable because it results in a $29
marginal profit. Conversely, an offer to purchase an additional unit for $50 would be rejected
because a marginal loss of $21 would be incurred. λ can be thought of as a planning variable,
because it provides valuable information concerning the effects of altering current activity levels.

Another example provides additional perspective on the Lagrangian method. Recall from the
discussion of Equation 2.16 that the profit function,
π = –$10,000 + $400Q – $2Q2
where π is total profit and Q is output in units, is maximized at Q = 100 with π = $10,000. The
impact of constraints in the production process, and the value of the Lagrangian method, can be
portrayed by considering the situation in which each unit of output requires 4 hours of skilled
labour, and a total of only 300 hours of skilled labour is currently available to the firm. In this
instance, the firm seeks to maximize the function
π = –$10,000 + $400Q – $2Q2,
subject to the constraint 4Q = 300 (because L = 4Q).
Rearrange the constraint to bring all terms to the right of
the equal sign:
0 = 300 – 4Q
Multiplying this form of the constraint by λ and adding the result to the original objective
function creates the Lagrangian expression:
Lπ = –$10,000 + $400Q – $2Q2 + λ (300 – 4Q)………………...……………….Equation 2.19
with the following partials:
∂Lπ/∂Q = 400 – 4Q – 4 λ and
∂Lπ/∂ λ = 300 – 4Q
Setting these two partials equal to zero results in a system of two equations and two unknowns.
Solving provides the values Q = 75, λ = $25, and, from the objective function, π=$8,750. The
constraint on skilled labour has reduced output from 100 to 75 units and has reduced total profits
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from $10,000 to $8,750. The value λ = $25 indicates that should a one-unit expansion in output
become possible, total profits would rise by $25. This information indicates that the maximum
value of additional skilled labour is $6.25 per hour, because each unit of output requires 4 hours
of labour. Assuming there are no other costs involved, $6.25 per hour is the most the firm would
pay to expand employment.
If an additional 100 hours of skilled labour, or 400 hours in total, is available, the output
constraint would become 0 = 400 – 4Q, and solved values Q = 100, λ= $0, and π = $10,000
would result. The value λ = $0 indicates that skilled labour no longer constrains profits when 400
hours are available. Profits are maximized at Q = 100, which is the same result obtained in the
earlier unconstrained solution to this profit maximization problem.
In this instance, the output constraint becomes nonbinding because it does not limit the profit-
making ability of the firm. Indeed, the firm is not willing to employ more than 400 hours of
skilled labour. To illustrate this point, consider the use of 500 hours of skilled labour and the
resulting constraint 0 = 500 – 4Q. Solved values are Q = 125, λ = –$25, and π = $8,750.
The value λ = –$25 indicates that one additional unit of output, and the expansion in employment
that results, would reduce profits by $25. Conversely, a one-unit reduction in the level of output
would increase profits by $25. Clearly, the situation in which λ < 0 gives the firm an incentive to
reduce input usage and output, just as λ > 0 provides an incentive for growth.
To generalize, a Lagrangian multiplier, λ, indicates the marginal effect on the objective function
of decreasing or increasing the constraint requirement by one unit. Often, as in the previous
examples, the marginal relation described by the Lagrangian multiplier provides economic data
that help managers evaluate the potential benefits or costs of relaxing constraints.
Thus, the Lagrangian multiplier technique creates an additional artificial variable for each
constraint. Using these artificial variables, the constraints are incorporated into the objective
function in such a way as to leave the value of the function unchanged. If a problem has two or
more constraints, then a separate variable is defined for each constraint and incorporated into the
Lagrangian function. In general, λ measures the marginal change in the value of the objective
function resulting from a one-unit change in the value on the right hand side of the equality sign
in the constraint relationship.

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