Question

If the price of apple in london  is $2/kg, the price of apples in Genevia is $4/kg and it costs $1/kg to transport apples from london to Genevia what is likely to happen to

the price of apples in genevia and london and why?

Answer 1

As we can see from the information provided that the apples are cheaper in London as compared to the Geneva and it costs one dollar per KG to transport apples from London to Geneva, therefore, we can expect the people to buy the apples in London and transport them to the Geneva, because the total cost of buying the Apple in London and transporting them to Geneva is tthree dollar per KG which is still less than the cost of apples in Geneva. As the demand for apples in London will go up, therefore, prices of apple will increase and the prices of apples in Geneva will decrease due to the lower demand.