determine the purchasing power of the country China for a consumer good that they would buy from their Canadian trading partner. Also, calculate what Canada’s purchasing power is with a country that they import from. See example below on Coca Cola and Mexico.
determine the purchasing power of the country China for a consumer good that they would buy from their Canadian trading partner. Also, calculate what Canada’s purchasing power is with a country that they import from. See example below on Coca Cola and Mexico.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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determine the
consumer good that they would buy from their Canadian trading partner. Also, calculate what
Canada’s purchasing power is with a country that they import from. See example below on Coca Cola
and Mexico.
Purchasing Power Example
In the example of the picture, if a Canadian company operating in Mexico were to pay its Mexican employees
the equivalent of $10/hour CAD (or 100 pesos/hour according to our fictional exchange rate), the
Mexican employee would actually enjoy greater purchasing power (the ability to acquire 20 colas
versus only 10 colas) than his/her Canadian counterparts.
the equivalent of $10/hour CAD (or 100 pesos/hour according to our fictional exchange rate), the
Mexican employee would actually enjoy greater purchasing power (the ability to acquire 20 colas
versus only 10 colas) than his/her Canadian counterparts.
Transcribed Image Text:Country
Current exchange rate
Hourly wage rate at current exchange rate
(flexible)
Current cost of Coca-Cola in each country
Total number of colas that may be purchased
with one hour of work at current wages
(purchasing power)
Canada
$1 CAD
$10/hr CAD
1/can CAD
10 colas
Mexico
10 pesos MXN
100 pesos/hr MXN
5 pesos/can MXN
20 colas
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