Question

Suppose the price of a pound of flax seed in west virginia is currently $1.00. the law of one price suggests that because the price of a pound of flax seed is $1.20 in kentucky, the price of a pound of flax seed will be ___________ in west virginia after sellers adjust their supply in both markets.

Answer 1

It will be between $1.00 and $ 1,20

Step-by-step explanation:

Solution

Given:

From the given question, the price of a flax seed in west Virginia is presently at $1.00

From the law of one price states that since the price of a pound of flax seed is $1.20 in Kentucky,

Then,

The price of a flax seed pound will be between 1.20 and 1.00

Therefore, the price of the flax seed in Kentucky as compared to that of west Virginia will be placed in between prices of $1.20 and $1.00 after the supply by sellers in both market has been adjusted or raised.