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If a company is exporting from, say, the UK to the US, and the US $ weakens from, say, $/£ 1.3 to $/£ 1.4 (getting more $ per £ means that the $ is less valuable, so weaker), any exports from the UK will be more expensive when priced in $. So goods priced at £1,000 will cost $1,400 instead of $1,300, making those goods less competitive in the UK.
Query:
Initially $ 1000 = £ 1300.
After the exchange rate changes, $ 1000 = £ 1400.So shouldn’t the last line be; So goods priced at $ 1,000 will cost £1,400 instead of £1,300, making those goods less competitive in the UK.
Right?? I don’t understand the last line. How can £ 1000 be equivalent to $ 1400??
Also, the bit about “less competitive.” What does that mean?
So goods priced at $1,000 will cost £1,400 instead of £1,300, making those goods less competitive in the UK……
This is because when the exchange rate changes from $/£1.3 to $/£1.4, it means that the pound has weakened and the dollar has strengthened. Therefore, it takes more pounds to buy the same amount of dollars. As a result, goods priced in dollars will be more expensive when converted to pounds, making them less competitive in the UK market.Regarding the term “less competitive,” it means that when goods become more expensive in a particular market, they are less likely to be purchased compared to similar goods that are priced lower. In this case, when the goods from the UK are priced higher in dollars, they become less competitive in the UK market because consumers may choose to buy goods from other countries that are priced lower in pounds.
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