shadow price


The implicit value or cost associated with a constraint. That is, the increased value that will be achieved by relaxing the constraint by one unit. When foreign exchange is rationed, the shadow price of foreign exchange becomes the relevant exchange rate for making decisions.

Use shadow price in a sentence

I wanted to know the shadow price of the item, because that was valuable information and would effect my choice.

​ Was this Helpful? YES  NO 11 people found this helpful.

The shadow price of the good was actually much higher than expected and the company found itself unable to export the goods and still make a profit.

​ Was this Helpful? YES  NO 2 people found this helpful.

Becuase price controls or rationing can always be repealed, many times shadow prices are relavent to business decisions even if a rationing schemes have been in effect for years.

​ Was this Helpful? YES  NO 10 people found this helpful.

Show more usage examples...

Browse Definitions by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Shadow Open Market Committee (SOMC) shadow rating