Question

Which of the follow could explain why the price of a grande latter at a Starbucks in San Diego violates purchasing power parity compared to a latte in Tijuana?

	A). The price of real estate in San Diego is much higher than in Tijuana.
	B). There is an impenetrable wall along the US-Mexico border.
	C). Mexican-run businesses offer a level of hospitality that is incomparable to other countries.
	D). All of the above are possible explanations.

Answer 1

Price of grand latte at Starbucks in San Diego violates the the purchasing power parity compared to latte in Tijuana because the price of real estatein San Diego is much higher because there would be a changes in the living standard as well as changes in the the currency fluctuation along with the real estate market so it can be said that there is high price of real estate in San Diego.Hence there would be a higher pricing of Starbucks in San Diego to meet the standards of pricing of other market.

Other statements are not that apt because it is not about wall between the United States and Mexico border and there is not such reason like Mexican run business will be offering a level of hospitality that is not comparable to another country.

Correct answer will be option (A) the prices of real estate in San Diego is much higher than in Tijuana.