samba
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#21
Report 7 years ago
#21
(Original post by Abdul-Karim)
The free-market still decided the average price at which the drinks can be realistically sold for derived from the signalling function, where firms would initially research which price range the drinks can be sold for and still demanded. Also due to soft-drinks being in a competitive market they are price-takers and would sell close to the free-market equilibrium in threat of competition.
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El Salvador
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#22
Report 7 years ago
#22
(Original post by Abdul-Karim)
The free-market still decided the average price at which the drinks can be realistically sold for derived from the signalling function, where firms would initially research which price range the drinks can be sold for and still demanded. Also due to soft-drinks being in a competitive market they are price-takers and would sell close to the free-market equilibrium in threat of competition.
So in short, the soft drinks companies set the prices at what they think would be acceptable to retailers and customers; and the Chinese government set the rates at what they think would still be acceptable to other traders. Both succeeded. If anything, the fact that China does it by selling or buying their own currency is a lot more 'natural' than Coca Cola pricing something entirely out of thin air (their costs have hardly anything to do with it, and the price differently to different retailers even in the same area).

The Euro was created in the exact same way. They tried to maintain the same rates everywhere to unify the currencies. Governments during the financial crisis in 1998 all tried to protect their currencies artificially over the artificial devaluing of their currencies.

Also, my original point was that there was nothing not artificial about currency exchange. It's all artificial. Currencies and monies are artificial. To argue that being artificial makes it bad is a fallacy when from the nature of the entire thing is artificial. The free market was entirely artificial and even manipulative. Nobody has perfect information, and nobody actually knows how the currency rates (of other currencies) have been set.

The only difference is the intent which is irrelevant especially when the Chinese government is likely to be doing it for economic gains (aka what everybody else does), instead of purely for fun or just to let people who hold YMB suffer for whatever reason.
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