Ask a Question
  
  
  
Top Posters
Since Sunday
28
27
27
26
25
24
24
23
23
22
22
22
New Topic  
wrote...
Posts: 69
3 weeks ago
What is meant by the "law of one price"? In discussing the law of demand, Hubbard and O'Brien claim there has been only one example found of an exception to the law (that is, evidence of an upward-sloping demand curve). Are there exceptions to the law of one price?
Source  Download
Microeconomics
Edition: 7th
Authors:
Read 8 times
1 Reply
Replies
Answer verified by a subject expert
wrote...
Posts: 78
Rep: 7 0
3 weeks ago
Sign in or Sign up in seconds to unlock everything.
The law of one price states that identical products should sell for the same price everywhere. But this law refers to a tendency for prices to be equal in different locations, not that such differences never occur. If identical products do sell for different prices in different locations arbitrage profits can be earned by people who buy where the price is low and sell where the price is high. Arbitrage will eventually cause prices to move toward equality, but the law of one price will hold exactly only if transactions costs associated with arbitrage trade are zero. If there are transactions costs, price differences will persist.
This verified answer contains over 100 words.
Related Topics
New Topic      
Explore
Post your homework questions and get free online help from our incredible volunteers.
Learn More
Improve Grades
Help Others
Save Time
Accessible 24/7
  65 People Browsing
Your Opinion
In one word, how would you rate our website?
Votes: 80

Previous poll results: What's your favorite coffee beverage?
Related Images
 93
 133
 25