Purchasing Power Parity – How it Relates to The Pricing of QCommission Software
The Purchasing Power Parity (PPP) economic theory proposes that the cost of goods and services should be the same across different countries. This proposal aims at providing consumers across the world with equal prices of commodities. It seeks to achieve this by accounting for the differences in currency exchange rates.
Unfortunately, this can be a tall order in reality. Think about it – countries are not at the same level of development and this is among the factors that determine the pricing of the product. For example, transport costs for goods in a developed country are way too low compared to developing nations. In addition, taxes, especially on imports and exports, vary significantly across the globe. This goes a long way to affect the final price of a product.
How PPP is Calculated
Now, computing purchasing power parity of a country is a tedious process. This is because it involves determining what the various products in a country would cost in the U.S., assuming that parity existed. Here, the country’s currency exchange rate to the U.S. dollar plays a very big role. For instance, let’s say that a mug of coffee in Brazil costs R$4 and the same amount of drink goes for $2 in the U.S., the PPP for coffee between Brazil and U.S.A. is 4 divided by 2 which equals to 2.
This means that if you spent a dollar on a coffee drink in the U.S. you will have to spend R$ 2 in Brazil for the same amount of beverage. PPP calculation doesn’t stop there! It goes further to classify similar products in one group where their PPPs are averaged and a weighted PPP is obtained. These aggregated PPPs represent the expenditure on various product groups as per the national accounts.
The Relevance of PPPs
PPPs are commonly used to compare the economies of countries in terms of gross domestic product (GDP). This goes a long way in determining which economies are growing, especially, where data is compared over a period of time. This way, countries can be grouped according to the sizes of their economies.
PPPs are also important in determining price adjustments of commodities between countries. Here, factors such as the cost of living come into play. For example, consumers in the U.S.A. will pay more for a particular product than what customers in China would spend on the same item. This information is thus critical for global businesses because it determines how products are priced and consequently, their competitiveness in different markets.
How QCommission Implements PPP
QCommission is designed to be used globally as long as users understand English. At the moment, the software has sold in over 60 countries with varied economic growth. In order to make the product accessible and affordable to clients in these markets, the company has established a country discount plan with price subsidies ranging between 30% -50%.
This way, clients can get the product at competitive rates depending on the prevailing economic conditions in their country. The benefit of this pricing plan is that customers get a return on investment quicker than if the prices were retained at a higher rate. In addition, the discounted rates ensure that more businesses can enjoy QCommission’s leading increased efficiency which is critical to the growth of an economy.
PPP seeks to establish an equal pricing of commodities across countries. While this may be hard to achieve, it comes in handy when adjusting the prices of various products to fit a specific market depending on the country’s GDP. Now, QCommission software not only observes PPP in its pricing but also assumes a discounted plan across different countries varying between 30% and 50%. This ensures affordability and quick return on investment for clients.