Problem
The following price comparisons for identical products were observed in February 2004 between New York (NY) and London using the £$ exchange rate at that date.
- Fender Stratocaster (guitar) £438 NY: £645 London
- Apple iPod £158 NY: £249 London
- Levi 50s £26 NY: £45 London
- Rolex yacht master gold watch £10,372 NY: £12,390 London
- Pair of Jimmy Choo stilettos £392 NY: £360 London
- Nike airwave trainers £42 NY: £70 London
(a) How have movements in the £$ exchange rate contributed to these differences? (Note on average the US prices were 20% higher only 12 months previously.)
(b) What implications might follow from such price differentials?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.