2. Pepkoes Competitiveness Pepkoe sells its popular soft-drink in Japan which competes head-on with Suzukoes Japanese version of the soft-drink. In early 2005, when the exchange rate was 110 JPY / $, Pepkoes price was $ 2 per bottle, while Suzukoes price was 200 JPY per bottle. By late 2005, the exchange rate had moved to 90 JPY / $, but neither Pepkoe nor Suzukoe had changed their prices for their soft-drinks.

i) What has been the impact on Pepkoes competitiveness in the Japanese market?

ii) What has been the impact on the relative purchasing power of the US consumer of soft-drinks?