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. Net Exports

    The value of a country's total exports minus the value of its ...
  2. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  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. In economics, what is an index number?

    Economists often make comparisons between sets of data across time. For example, a macroeconomist might want to measure changes ... Read Full Answer >>
  2. What role does the agency problem play in the modern Health Care industry?

    Agency problems vary from health care system to health care system, and not all economists agree on the degree and desirability ... Read Full Answer >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. What role do transaction costs play in marginal utility analysis?

    The term "transaction costs" is much broader in economics than it is in general finance lingo. The traditional definition ... Read Full Answer >>
  5. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  6. What is the marginal utility of income?

    Very simply, the marginal utility of income is the change in human satisfaction resulting from an increase or decrease in ... 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 a Giffen Good?

    A Giffen good is a product whose demand increases as its price increases, and falls when its price falls.
  8. Professionals

    Will Consumer Spending Save 2015?

    Consumer spending is considered an important number (and it is), but a savvy investor will always look at "why" rather than just "what." You should too.
  9. Economics

    Explaining Budget Surplus

    Budget surplus is an economic term describing a situation where revenue exceeds expenditures.
  10. Economics

    Will the Selloff in China Hurt the Global Economy?

    Though China is the world’s second largest economy, its volatility in the stock market is unlikely to have an impact on the global or Chinese economy.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
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!