Question

A woven-leather chair costs $570 in the United States. If the exchange rate between U.S. dollars and Mexican pesos is $0.06 per peso, how much should the same chair cost in Mexico? Assume that purchasing power parity holds perfectly in this case.

Answer 1

9,500 pesos.

Step-by-step explanation:

Cost in dollars = $570

Exchange rate = $0.06 per peso

Assuming a perfect purchasing power parity, a straight-forward currency conversion from dollars to pesos should yield the cost of the woven-leather chair in Mexico.

Therefore, the cost of the woven-leather chair, in Mexico, is:

`C= \$570*(1\ peso)/(\$0.06) \\C=9,500\  pesos`