Discuss the degree to which business are affected by changes in the exchange rates. Your response should focus in the following issues The response of customers The degree of control over prices Importing components and raw materials

Authors Avatar



Question: Discuss the degree to which business are affected by changes in the exchange rates.

Your response should focus in the following issues

  • The response of customers
  • The degree of control over prices
  • Importing components and raw materials.

Exchange rate is the price for which the currency of a country can be exchange for another country’s currency.  The exchange are so important to businesses, this is because businesses are affected by changes in the exchange rate for a number of reasons. One way they are affected is that exchange rates have an influence on the price of imports and exports. And exchange rates can affect the prices for foreign investments. Businesses with products that are sensitive to price changes are likely to feel the impact of slight change in the exchange rate. This is because if export prices rise, the number of sales will fall drastically, and the total revenue for exports will fall. Exchange rate also affects businesses in terms of the response of customers, the degree of control over prices and importing components and raw materials.

Join now!

The exchange rate will always affect the consumers whether the exchange rate is high or low for them.  Brand names products are products that are always on demand , so even if their prices increase, consumers do not reduce the amount by much as these products are having an inelastic demand. The effect of the exchange rate is that if the value of dollar had to fall from 1$=1.8 pounds to 1$=1.5 pound. The a firm selling 1,000 bananas to America each month for 5 pounds at an exchange rate of $1 = 1.8 pounds, would receive 5,00 pounds in ...

This is a preview of the whole essay