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.

BREAKING DOWN '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.

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