- 2 Marks
Question
Explain the term shadow price.
(2 marks)
Answer
The term “Shadow Price” is used to refer to the monetary values assigned to currently unknowable or difficult-to-calculate costs. It represents the estimated price of a good or service for which no market price exists. Shadow prices are often used in decision making, particularly in situations where the availability of resources is limited and must be allocated optimally.
- Level: Level 2
- Topic: Decision making techniques, Relevant Cost and Revenue
- Series: MAY 2016
- Uploader: Dotse