Economy Revision for UPSC:What Is Purchasing Power Parity (PPP)?

What Is Purchasing Power Parity (PPP)?
One popular macroeconomic analysis metric to compare economic productivity and standards of living between countries is purchasing power parity (PPP). Let's discuss it.
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cost of living index ,upsc prelims 2022.

[@UditOjha]

It is actually $ 1 = Rs 23.30 now as per OECD Data.

[@Pankaj_Dhariwal]

Wrongly explained, sorry. PPP takes into account the differences in price level between countries. Suppose we want to compare GDP Produced in INDIA and US. Assume that both produces 1KG tomatoes it means that both should have equal GDP. But the price level of currencies that is cost of living will play the role. US has high cost of living than India. So market price of 1KG tomatoes in US say 2$/kg , while in India it is say 50₹/kg. Because of this difference we will be unable to compare GDP OF both countries because we measure it in terms of price of goods (GDP= total quantity of g&p x market price) . So it is obvious that if we want to compare the quantity of tomatoes produce which we know are equal in this example we need a constant price between to countries. So we multiply currency with a factor called ppp factor which convert the cost of tomatoes in such a way that it's final price become same for all countries. Every country has different factor to reach that one common price. So suppose now when I multiply indian and US currency by their respective factors to get that on common price of 1 kg tomato i.e. 100 /kg. So now when we multiply that common price with the qty. of tomatoes produced we can asses the difference in tomato produced as both countries GDP will only reflect the change in tomatoes produced in their economic territory. So PPP of any country is that rate of currency conversion (factor) which converts the price of basket of G&S it produced in such a way that the prixe is same for any other country. So next time If India produces 1.5 kg of tomato and US again produce 1 kg. India's GDP(PPP) will reflect that India has produced more tomato than US. HOPE IT HELPS

[@kungfu-ckpanda]

Bhai hindi mein smjha de

[@Tkukc1775]

Nice conceptual clarity🎉

[@KunwarBishnoi]

Really nice explanation

[@RDesai_indiancapitalist]

Thanks

[@bhavyabhogar1627]

how to calculate that purchasing power parity factor?

[@LuciousMaximus69]

Ajya will buy Vimal

[@HarshsinghShaktawat]

Sirrr wowwww ek baar me smjhaa diyaaaa😢😢😢😢😢😢😢😢 love youuuuu

[@utkarshsharma6501]

Does not help in solving MCQ. There's one PYQ regarding the same.

[@yuvrajsinh65]

Thank you so much sir..... .🙏🏻😊🙏🏻

[@divyasingh2012]

Thnq so much sir 🙏🏻

[@sarkarinokarijahirat]

Nice video

[@Skmemes959]

Ek bread ka packet 40 rupaye Ek litre dudh 70 se 80 rupaye Ek chocolate ka packet 40 se 150 rupaye bhai total 260 tak ho rha

[@justindas9308]

Ek bred ka packet 20 rupees tu hathi ka khana kharid ta hai kya

[@woman178]

Increasesing Purchasing power = decrease in ...... Protein muscle less power of the country and the community

[@gov-ai4154]

Wrong. Phook k sikha rha he.

[@mr.technical4129]

Sleepy hai bro ye💀

[@kundanry461]

Wrong solution 😕😕😅

[@EditorsPost]

Rank of india is wrong

[@justindas9308]

India GDP ppp rank 3rd nominal GDP rank 5th

[@Xplorer4ever]

Wrong

[@Skmemes959]

Ab ek dollar ka hisab lagao

[@RajeshSolanki005]

Pathetic explanation. not even help in any exam.