Meaning of shadow price | Babel Free

Definitions

A price for a resource, good, or service which is not based on actual market exchanges, but is mathematically derived from indirect data obtained from related markets.

Equivalents

Examples

“Friedman (1969) argued that a positive shadow price of money balances would violate the Pareto-efficiency condition that the shadow price of anything should equal its marginal cost.”

“We focus on indirect methods such as using individual choice between life-threatening versus safe jobs to infer something about the shadow price of life or using land rent differentials to infer the shadow price of air pollution.”

“Thus, the social cost and the shadow price of paddy is much higher than what is paid to the farmers.”

“Mike Young has been studying the shadow price of water, the amount that would be paid under normal market conditions.”

CEFR level