Consider a situation of two cities linked by a government-subsidized railway that effectively makes transportation free.In one city,there is high demand for fish and chips.In another city,fish and chips is considered unfashionable and is rarely eaten.Regardless of the difference in demand,the price for fish and chips is the same in both cities.This can be explained by what concept?

Question

Quizplus · Accepted Answer

The situation can be explained by the law of one price, which states that in a market with perfect competition and no transportation costs or trade barriers, identical goods should have the same price in different locations. Therefore, despite the difference in demand for fish and chips between the two cities, the price remains the same due to the government-subsidized railway effectively eliminating transportation costs.

Consider a Situation of Two Cities Linked by a Government-Subsidized