Prices for many goods are higher in the city of Shenzhen on the mainland of China than in the city of Hong Kong. An article in the Economist notes that "individuals can arbitrage these differences through what effectively amounts to smuggling." Source: "Restrictions on Travel to Hong Kong by Shenzhen Residents," Economist , April 13, 2015. The article means that individuals canA. A buy the product in Hong Kong and sell it in Shenzhen so eventually the price in Shenzhen will decrease and the price in Hong Kong will increase. B. buy the product in Shenzhen and sell it in Hong Kong so eventually the price in Hong Kong will decrease and the price in Shenzhen will increase C. rely on differences in demand for the product to even out the price changes. D. buy the product elsewhere in the world and sell t in these two markets Ultimately, you would expect the result of individuals engaging in this arbitrage to be similar

Question

Business

Hamza Anderson

29 March, 23:29

Prices for many goods are higher in the city of Shenzhen on the mainland of China than in the city of Hong Kong. An article in the Economist notes that "individuals can arbitrage these differences through what effectively amounts to smuggling." Source: "Restrictions on Travel to Hong Kong by Shenzhen Residents," Economist , April 13, 2015. The article means that individuals canA. A buy the product in Hong Kong and sell it in Shenzhen so eventually the price in Shenzhen will decrease and the price in Hong Kong will increase. B. buy the product in Shenzhen and sell it in Hong Kong so eventually the price in Hong Kong will decrease and the price in Shenzhen will increase C. rely on differences in demand for the product to even out the price changes. D. buy the product elsewhere in the world and sell t in these two markets Ultimately, you would expect the result of individuals engaging in this arbitrage to be similar

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Joanna Tate · Answer 1

A) buy the product in Hong Kong and sell it in Shenzhen so eventually the price in Shenzhen will decrease and the price in Hong Kong will increase

Explanation: when the price of the product in Shenzhen reduces due to the low priced product being sold in same place the high priced is sold, this would even out the demands and the price of that in Shenzhen would be dragged down to be able to compete with that of the low priced.