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The meaning of shadow prices

The value used in economic analysis for a cost or a benefit in a project when the market price is felt to be a poor estimate of economic value. Shadow price technically implies a price that has been derived from a complex mathematical model. Shadow prices are estimates of efficiency prices. For final goods and services, the shadow price is the value in use. For intermediate goods and services, the shadow price is the opportunity cost, the benefit foregone by using a scarce resource for one purpose instead of its next best alternative use.

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