Asimpler way to calculate purchasing power parity between two countries is to compare the price of a good that is in fact identical across countries.

Standard Good.

Explanation:

Purchasing power parity theory states that the exchange rate between the currencies are in equilibrium when the purchasing capacity is identical in both the nations. The purchasing power is equal in both the countries only if the price level of certain fixed basket of goods in one nation is identical to the other nation.

If the price level in any of the one nation increases, as a result its currency depreciates against the currency of other nation.

Purchasing power parity is calculated by comparing the price of standard good that is similar across nations but one key problem is that different people of different countries consumes different set of goods and services. So, it is difficult to compare purchasing power of different countries.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.