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Purchasing Power Parity

 
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PostPosted: Sun Apr 27, 2008 7:55 am    Post subject: Purchasing Power Parity Reply with quote

Purchasing power parity (PPP), which is becoming more popular to compare GDPs between countries, is accurate only for some commodities. Walmart-China is considered a luxury store. However, China's Wu-Mart, which sells cheaper and lower quality goods, is considered a normal goods store. In India, only seven out of 1,000 people own an auto. Indians cannot afford Toyotas at world prices. However, a new Indian car was created, the Tata Nano, which sells for $2,500 (i.e. using a hard currency at the world price). Below is a link showing the picture of the Nano "luxury version." (You may want to compare it to a Cadillac SUV in second link). There are also differences between countries production mix. For example, E.U. GDP reflects more income redistribution and government goods, while U.S. GDP reflects more new products and household goods.

http://www.autoindia.com/News/AINews.aspx

http://en.wikipedia.org/wiki/Image:CadillacEscalade.jpg
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