Purchasing power parity does not hold for single products,it is meaningful only when applied to a basket of goods.

Question

Quizplus · Accepted Answer

Purchasing power parity (PPP) is a theory that suggests that the exchange rates between two countries should be at equilibrium when the prices of identical baskets of goods and services are equalized in each country. Therefore, PPP applies to a basket of goods and not to single products. While the prices of individual products may vary across countries due to factors such as tariffs, transportation costs, and local demand, the prices of a basket of goods should be more consistent across countries when adjusted for exchange rates.

Purchasing Power Parity Does Not Hold for Single Products,it Is