Law of one price

The law of one price (LoP) is an economic concept which posits that "a good must sell for the same price in all locations". This law is derived from the assumption of the inevitable elimination of all arbitrage.

The law of one price constitutes the basis of the theory of purchasing power parity, an assumption that in some circumstances (for example, as a long-run tendency) it would cost exactly the same number of, for example, US dollars to buy euros and then to use the proceeds to buy a market basket of goods as it would cost to use those dollars directly in purchasing the market basket of goods.