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

Explain the phenomenon of capital flight, Q. Explain the phenomenon of capi...

Q. Explain the phenomenon of capital flight. Answer: The reserve defeat accompanying a devaluation scare is habitually labeled capital flight for the reason that the assoc

Relative income of workers in australia as a result of trade, Q. Using the...

Q. Using the diagram, show what happens to the composition of production (that is quantity of cloth per 1 unit of food) in Australia once trade is established between the two coun

Who are major participants in the foreign exchange market, Q. Who are the ...

Q. Who are the major participants in the foreign exchange market? Answer: 1. Commercial banks 2. Corporations 3. Nonblank financial institutions 4. Central banks

Policy tool under fixed exchange rates, Q. "A monetary policy is not ...

Q. "A monetary policy is not a policy tool under fixed exchange rates." Discuss. Answer: It is True Under fixed exchange rates domestic asset transactions by the centr

Explain the concepts of trade creation, When asked by the Carnegie Commissi...

When asked by the Carnegie Commission to prepare a report on post war Preferential Trading Agreements, Viner (1950) pointed out that they are not free trade. He used the concepts o

Extensions and tests of the classical model of trsde, #question.suppose tha...

#question.suppose that France has a trade surplus with the United Kingdom. What would you expect to happen to price, wages, and commodity price in France? why? What would happen to

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