Page 130 - DMGT521_PROJECT_MANAGEMENT

Unit 8: Social Cost Benefit Analysis

Shadow Pricing Notes

1. Traded goods and services : The shadow prices of traded goods and services are the border
price. If a good is exported its shadow price is the FOB price and if a good is imported its
border price is the CIF price. If foreign demand is not perfectly elastic the marginal export
revenue is substituted for the FOB and if foreign supply is not perfectly elastic, the marginal
import cost is substituted for CIF prices.
2. Non-traded goods and services: Accounting prices for non-traded good are defined in
terms of marginal social cost and benefit. The marginal social benefit is the value of an
extra unit of good from social point of view and the marginal social cost of a good is the
value in terms of accounting prices of the resources required to produce an extra unit of
the good. To determine the accounting price of a non traded input the following formula
is to be used: 2/3 marginal social cost + 1/3 marginal social benefit.

3. Labour: The L-M approach suggest the following formula for calculating the shadow
wage rate
SWR = c’ – 1/s (c-m)

Where SWR = shadow wage rate
C’ = additional resources devoted to consumption
1/s = value of a unit committed resources
c = consumption

m = marginal product of wage earner
Self Assessment

Fill in the blanks:
10. The ………………… institutions already represented in India also constantly strive to
attain competitive advantage over one another.
11. Financial institutions are heavily reliant on ………………… service providers for Web
sites and other core information systems.

12. The ………………… Transformation Services (DTS) and other Back Office Products included
with MSSQL Server make it very efficient for use in this manner.
13. ………………… to meet regulatory guidelines can result in severe penalties for financial
institutions.
14. In addition ………………… institutions have a strong business requirement to analysis
daily financial transactions in order to spot portfolio, lending, and financial market trends,
customer requirements, and improve services.

8.5 Summary

 Social Cost Benefits Analysis means to analyze the social cost and total social benefits if
we accept any project.
 In public investment, we analyze and compare government expenditure with total benefits
to society through SCBA.
 We will not analyze social cost benefit; we can not find market imperfections. After study
of market rates following factors come in to our knowledge.

LOVELY PROFESSIONAL UNIVERSITY 125