Purchasing Power Parity: Why We Learn About Something Never be Happened?

Economics no different than physycs. When we learn about force we assume that force work in ideal condition, the condition which is no force work in an object but the force we learn. As well we learn about ideal gases. Ideal gas, ideal condition, and everything connected by word ideal are do not exist in reality. And in economics, we also learn about theory that never be happened in reality. Purchasing Power Parity.

Purchasing Power Parity says that everyone has same purchasing power no matter where he/she is. The implication of this condition make price of a good in a country will be same in another country.

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In other wise, there is many factors make price in a country and others never be same. When we distribute a goods there is some expenses accompanies the process. So no wonder price of gold in South Africa perhaps cheaper than in Indonesia. Seller will provide tariff cheaper in teritories which is near with center of production. It because transportation expense will less than far ones.

Other factor is, some countries do dumping. Dumping is economy strategy which is sell more expensive than in overseas. This is strategy for expansing segments in overseas. Moreover, the country which use this economy politics able to supplies demands aggregate by it own products. For example Japan.

So what the function of studying purchasing power parity? For comparing the value of currency with currency of other country. Somehow, it is not easy work because there are many varriables become factors of money value. We also ought to learn about statistic so we have valid data to determine value of currency.