<p>If PPP holds, so does the LOP.</p>

<p>The law of one price (LOP) is an economic concept which posits that "a good must sell for the same price in all locations". The law of one price constitutes the basis of the theory of purchasing power parity and is derived from the no arbitrage assumption.</p>

CC BY-SA 3.0
2015-04-13T23:12:05.943Z
2015-04-13T23:12:05.943Z
Jamzy
<p>If PPP were to be satisfied in reality, does that mean the Law Of Price is satisfied for all goods in a basket of goods used to generate the price levels of the country? Or, since PPP uses only average price of basket, is there possibility of "accidentally" PPP is satisfied without holding LOP for each good?</p>

<international-economics>
Purchasing Power Parity (PPP) and Law of One Price (LOP)
user51966
# Purchasing Power Parity (PPP) and Law of One Price (LOP)

(Asked by: username_0 on 2014-12-14)

If PPP were to be satisfied in reality, does that mean the Law Of Price is satisfied for all goods in a basket of goods used to generate the price levels of the country? Or, since PPP uses only average price of basket, is there possibility of "accidentally" PPP is satisfied without holding LOP for each good?

**Tags:** international-economics

---

## 1 answers

### Answer by username_1 on 2015-04-13. Score: 2 | Accepted answer

If PPP holds, so does the LOP.

The law of one price (LOP) is an economic concept which posits that "a good must sell for the same price in all locations". The law of one price constitutes the basis of the theory of purchasing power parity and is derived from the no arbitrage assumption.


---

