N1

Suppose a Greek tourist visits Abu Dhabi, and in particular a cloths market in Abu Dhabi Mall. The tourist bought one blue jean brand Wrangler for 159 AED and noticed that this particular jean is quite cheaper in Abu Dhabi in comparison with its price in the Athens Mall in Athens. The tourist claimed that the same blue jean costs 50 euro in Athens Mall. (a). Given that the spot exchange rate is 1 euro = 3.82 AED, estimate the price of a jean Wrangler in Athens Mall with respect of the purchasing power parity between Greece and UAE. (b). Is Wrangler jean in the Athens Mall more expensive that in the Abu Dhabi Mall given the exchange rate euro/dirham under the PPP hypothesis? Explain. (answer with not enough explanation will get half grade).