Price Scissors

AAA

DEFINITION of 'Price Scissors'

When the value of one set or sector of a group falls below the value of other sets within the other group. Price scissors occur when the value of a sector falls dramatically while another sector rapidly gains in price. This phenomenon can cause chaos as individuals do not expect prices to take such wild and opposite directions from the norm.

INVESTOPEDIA EXPLAINS 'Price Scissors'

For example, if a country is a net exporter of dairy products and a net importer of crude oil, a large price drop in the world wide value of milk combined with a sharp increase in the value of a barrel of oil would cause a price scissors, which derives its name from its graphical illustration. The domestic economy would struggle to cope with having to pay much more for crude while being unable to sell dairy products at prices which they are accustomed to.

RELATED TERMS
  1. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  2. Net Exports

    The value of a country's total exports minus the value of its ...
  3. Net Importer

    A country or territory whose value of imported goods is higher ...
  4. Import

    A good or service brought into one country from another. Along ...
  5. Export

    A function of international trade whereby goods produced in one ...
  6. Factor Market

    A marketplace for the services of a factor of production.
RELATED FAQS
  1. Why do economists think it is important to track discretionary income?

    Economists track discretionary, and disposable, income as a proxy for the growth in the financial health of average citizens ... Read Full Answer >>
  2. How do you calculate GDP with the expenditures approach?

    To calculate gross domestic product, or GDP, with the expenditures approach, add up the sums of all consumer spending, government ... Read Full Answer >>
  3. What are some benefits of a mixed economic system?

    In economic theory, a mixed economic system is a combination of capitalism and socialism, allowing for private property along ... Read Full Answer >>
  4. How does neoclassical economics relate to neoliberalism?

    While it may be likely that many neoliberal thinkers endorse the use of (or even emphasize) neoclassical economics, the two ... Read Full Answer >>
  5. In what manner will a recession likely affect the marginal-propensity-to-save rate ...

    The marginal propensity to save, or MPS, rises in most, though not all, recessions. This makes perfect sense on an individual ... Read Full Answer >>
  6. What are key economic growth rates that can be used to determine the economic health ...

    Before you can determine the proper indicators for economic health, you must understand what causes an economy to grow and ... Read Full Answer >>
Related Articles
  1. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  2. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  3. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  4. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  5. Economics

    Do Cheap Imported Goods Cost Americans Jobs?

    Flooding the market with cheap products can mean job losses and even market collapse - but dumping isn't as threatening as it seems.
  6. Economics

    In Praise Of Trade Deficits

    When a country imports more than it exports, is it a recipe for disaster or just part of a larger cycle?
  7. Economics

    What is Neoliberalism?

    Neoliberalism is a little-used term to describe an economy where the government has few, if any, controls on economic factors.
  8. Economics

    How Creative Destruction Happens in Real Life

    In his seminal work, Capitalism, Socialism and Democracy (1942), Joseph Schumpeter proclaimed “the essential fact about capitalism” as being a process “that incessantly revolutionizes the economic ...
  9. Fundamental Analysis

    Explaining the Empirical Rule

    The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.
  10. Economics

    Understanding Diseconomies of Scale

    Diseconomies of scale is the point where a business no longer experiences decreasing costs per unit of output.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!