- This topic has 3 replies, 2 voices, and was last updated 4 years ago by
.
- Posts
Dear John, I wanted to ask whether the shadow price is always calculated Per unit like most extra we are prepared to pay for ONE extra unit of limited resource or is it the total extra price we are prepared to pay for a bundle or bulk of extra limited resource. I am aware that we can calculate the Per Unit if we buy like 100kg materials for $1000 then Shadow price P.U will be $0.2
Now i am writing , it sounds silly to ask. As price is always Per unit but just for the peace of mind please tell If in exam Extra units provided ( ex X wants to buy 100kg extra as in above example) and asked what is the shadow price. Am i supposed to write $0.2 is shadow price or the $1000 is
Greatly Appreciate
The shadow price is the extra we would be prepared to pay for one extra unit of the limited resource.
So if asked for the shadow price you would state the most extra that you would be prepared to pay (above the normal price) for 1 extra kg..
If, on the other hand, the question asked how much extra you would be prepared to be for another 100kg, then it would be 100 x the shadow price.
(I have no idea where you got $0.20 from on your figures).
- The topic ‘Shadow prices’ is closed to new replies.