When UK-based Hewitt Automotive Designs starting trading, the exchange rate was £1 = €1.50. Most of the company’s business is based in the European Union. In the past decade the exchange rate has fallen to €1.10. This represents a depreciation of 26 percent. Their standard customization of a high-end car costs the business £40,000. They sell the finished product in the United Kingdom for £50,000.

Explain how the 26 percent depreciation has impacted the selling price in the European Union and the probable impact on demand from that market. L01