Absolute purchasing power parity A primary principle of competitive markets is that prices will equalize across markets if frictions (transportation costs)do not exist. Comparing prices then,would require only a conversion from one currency to the other: P$XS=P￥ Where the product price in US dollars is (Ps),the spot exchange rate is (S)and the price in Yen is (P*).Absolute purchasing power parity A primary principle of competitive markets is that prices will equalize across markets if frictions (transportation costs) do not exist. Comparing prices then, would require only a conversion from one currency to the other: P$ x S = P¥ Where the product price in US dollars is (P$), the spot exchange rate is (S) and the price in Yen is (P¥)