Explain the law of one price. give an example, International Economics

Assignment Help:

Q. Explain the Law of One Price. Give an example.

Answer: The law of one price affirms that in competitive markets free of transportation costs and trade barriers identical goods sold in different countries must sell for the same price when expressed in terms of the same currency.

US = (E$/E) x (P E) for good i.
E$/E = Pi i
US/P UK

If for instance, the price of the same jersey was cheaper in London than in New York U.S importers and British exporters would have an incentive to buy jerseys in London and ship them to New York pushing the London price up and the New York price down until both were equal.


Related Discussions:- Explain the law of one price. give an example

Why do we observe the leontief paradox, Q. Why do we observe the Leontief ...

Q. Why do we observe the Leontief paradox? Answer: There are several possible answers that they may be categorized into three groups. One would argue that the theory or model

Classical theory, What are disadvantages the classical theory of internatio...

What are disadvantages the classical theory of international trade

Analyze effects of an increase in the european money supply, Q. Analyze the...

Q. Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate. Answer: The major points are: A raise in the European money supply will re

Strategic groups and strategic characteristics, Strategic groups      ...

Strategic groups        "Strategic groups are organizations within an industry with similar strategic characteristics, following similar strategies or competing on similar bas

Substantial current account deficit, Q. What are the reasons for the world ...

Q. What are the reasons for the world as a whole running a substantial current account deficit? Answer: This deficit improved sharply in the early 1980s and has remained high.

calculate the gross and net national product, Given the following hypothet...

Given the following hypothetical data (in millions of naira): 1.    gross private domestic investment        N59 2.    contributors for social insurance           N8 3.    inter

#the classical theory of international trade title.., Critically evaluate t...

Critically evaluate the classical theory of international trade

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd