Description
objectiveChange = resourceChange*shadowPrice, with shadowPrice in objective units per resource unit.
An economic model specifies how quantities, prices or marginal values relate under stated assumptions. A derivative, reaction function or first-order-condition term is a local model object rather than an empirical finding or complete equilibrium solution.
objectiveChange = resourceChange*shadowPrice, with shadowPrice in objective units per resource unit.
When to use this tool
Use Opportunity Cost Shadow Price Term when checking one explicit theoretical economic-model relationship.
How to use the tool and how it works
- Enter resourceChange, shadowPrice. Use the units and conventions below.
- Run the tool. Correct any format, range, or cross-field input error before interpreting the output.
- Read objectiveChange. Use the output convention below.
objectiveChange = resourceChange*shadowPrice, with shadowPrice in objective units per resource unit.1
| Input field | Meaning and units | Accepted input |
|---|---|---|
| resourceChange | Resource Change | Required. Finite number. |
| shadowPrice | Shadow Price | Required. Finite number. |
| Output field | Interpretation | Returned shape |
|---|---|---|
| objectiveChange | Objective Change | Required. Finite number. |
{
"input": {
"resourceChange": 4,
"shadowPrice": 12
},
"output": {
"objectiveChange": 48
}
}Limitations and assumptions
- This is a local linear sensitivity term. Shadow prices are supplied and need not remain valid after a large resource change or a change of active constraints.
- Inputs must satisfy both the field types and the cross-field conditions above. Invalid input causes an error; a successful false flag or documented placeholder is a different result.
- Numeric calculations use binary floating point unless exact decimal-integer arithmetic is explicitly stated. No hidden measurement tolerance or decimal rounding is added; nonfinite or out-of-contract results are rejected. Numeric signed-zero results are exported as zero.
Alternative or Complementary methods
Use a complete model, defensible parameter estimates and suitable identification before drawing empirical or policy conclusions.
References
Similar or alternative tools
- Production Cost Returns Exponent
elasticity = ln(costScale)/ln(outputScale); superlinear tests elasticity > 1.
- Production Possibility Frontier Local Slope
Return the signed local second-good-versus-first-good production-frontier slope and its opportunity-cost magnitude.