Law of One Price
The Law of One Price is an economic principle stating that in an efficient market, identical goods or assets will trade at the same price when expressed in a common currency, assuming no transaction costs, tariffs, or other trade barriers. Any deviation from this single price would create a risk-free profit opportunity through arbitrage, where traders could buy the good at the lower price and sell it at the higher price, a process that would continue until the prices converge.
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Economics
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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Imagine a market for coffee beans is in a state of balance where the amount buyers want to purchase is exactly equal to the amount sellers want to sell at the current price. A sudden, unexpected widespread drought occurs in the world's primary coffee-growing regions, damaging a significant portion of the crop. Assuming no other changes, what is the most likely immediate impact on the price and quantity in the coffee bean market?
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Consider the following market schedule for a hypothetical product. The market-clearing price, where the quantity buyers wish to purchase exactly equals the quantity sellers wish to sell, is $____.
Price Quantity Demanded Quantity Supplied $1 50 10 $2 40 20 $3 30 30 $4 20 40 $5 10 50 In a perfectly competitive market for corn, the price has settled at an equilibrium of $4 per bushel, where the quantity supplied by all farmers exactly equals the quantity demanded by all buyers. Consider a single farmer in this market. Why would this farmer have no incentive to unilaterally raise their price to $4.25 per bushel?
In a large city, the market for one-bedroom apartments is in a state of balance: the number of available apartments matches the number of people seeking to rent them at the current average price. A city official proposes a new law that sets a maximum legal price for these apartments, 20% below the current average. The official claims this will make housing more accessible for everyone who wants an apartment. Based on the principles of market balance, which statement best evaluates the likely result of this price ceiling?
Law of One Price
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Exogenous Supply Shock
Equilibrium Price
Supply and Demand Diagram for the Second-Hand Book Market