Abstract
When a businessman evaluates a project, he does it with a view to calculating the prospective profit from it. These calculations can be seen as taking place in two steps. At the first step, all the physical consequences of relevance to the businessman – the inputs to and outputs from the project – are assessed. At the second stage, these inputs and outputs are converted into costs and revenues, using market prices. It is natural that a private businessman should use the ruling market prices for costing inputs and for valuing sales, since these are the prices at which transactions take place and hence profit generated.
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Little, I.M.D., and J.A. Mirrlees. 1974. Project appraisal and planning for developing countries. London: Heinemann.
Sen, A.K. 1972. Control areas and accounting prices: An approach to economic evaluation. Economic Journal 82 (Supp): 486–501.
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Kanbur, R. (2018). Shadow Pricing. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1314
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DOI: https://doi.org/10.1057/978-1-349-95189-5_1314
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Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-95188-8
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