4. Comparing prices in different countries Suppose you live in the United States

Question

4. Comparing prices in different countries Suppose you live in the United States and plan a vacation in London. You want to find the least request quotes from Independence Airline (a U.S. airline) and Queen's Airways (a u.K. airline). The followng table shows the quoted prices in national currencies. Suppose that the current exchange rate, or dollar price per pound, is $2.07-1. expensive airfare ticket, so you Airline Price Independence Airline $1,300 Queen's Airways E600 To compare the prices of the two tickets, you need to express them in a common currency. The price of the Queen's Airways ticket in dollars is $ . Therefore, the ticket is cheaper for you to buy Your friend travels to London a month later. At the time she buys her airfare ticket, the prices quoted by the two airlines are the same as before, but the exchange rate, or dollar price per pound, has risen to 2.31 E1. Assuming that your friend is looking for the least expensive deal, she will travel with In this scenario, the U.S. dollar a U.K. company became ? expensive tou. s. consumers V against the British pound. As a result, the dollar price of an airplane ticket sold by Since the same logic applies to other goods and services, you can say that U.K. goods and services

Explanation / Answer

Ans1)

Queen's Airways cost in USD=600 pounds*2.07dollars/ pounds=1242 dollars

Therefore Queen's Ariways ticket is cheaper to buy

Ans 2)

New Exchange Rate is 2.31 USD =1 Pound

Queen's Ticket will cost=2.31*600=1386 USD hence costlier than Independace Airlines hence she will travel with Independance Airlines

Ans 3)

US dollar depreciated against the British Pound. UK goods and services became more expensive to US consumers

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