During a change in the real exchange rates,a major factor determining the response of the firm is the ________.

Question

Quizplus · Accepted Answer

The price elasticity of the product's demand curve is a major factor in determining the response of the firm during a change in real exchange rates. If the product has a high price elasticity of demand, then the firm may need to adjust its prices in response to changes in exchange rates to maintain its market share. On the other hand, if the product has a low price elasticity of demand, then the firm may be able to maintain its prices and profitability despite changes in exchange rates. The other options (A, B, and D) may also affect the firm's response, but they are not the primary factor.

During a Change in the Real Exchange Rates,a Major Factor