What is the differemce between "the law of one price" and "PPP"?

Check this site for explanations.

http://internationalecon.com/Finance/Fch30/F30-1.php

"The law of one price" and "PPP" (Purchasing Power Parity) are related concepts in economics that relate to the idea that the prices of goods should be relatively equal across different countries. While they are similar, there is a subtle difference between the two.

"The law of one price" states that in competitive markets, identical goods should have the same price in different locations when their prices are expressed in a common currency. This means that if there are no trade barriers, transportation costs, or other transaction costs, the price of a good in one country should be the same as the price of the same good in another country. In other words, there should be no arbitrage opportunity.

On the other hand, PPP is a theory that focuses on the long-term relationship between exchange rates and inflation rates. PPP suggests that the exchange rate between two currencies should adjust relative to the difference in inflation rates between those countries. This adjustment ensures that the purchasing power of each currency is equal in both countries. In essence, PPP determines the exchange rate that would make a basket of goods and services equally priced in different countries.

While both concepts deal with the equality of prices in different countries, "the law of one price" is a narrower concept that addresses the immediate pricing of identical goods, while PPP focuses on the relationship between exchange rates and long-term price levels.

For more detailed explanations and examples, you can refer to the website you mentioned: http://internationalecon.com/Finance/Fch30/F30-1.php. This site provides a comprehensive explanation of the concepts with illustrative examples to enhance your understanding.