Solution for Managerial Economics 4th Edition Chapter 11, Problem 1

by Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
147 Solutions 23 Chapters 104189 Studied ISBN: 9781305259331 Economics 5 (1)

Chapter 11, Problem 1 : 11-1 Explain the Peso Devaluation In...

11-1 Explain the Peso Devaluation

In August 2008, Mexican pesos were trading at $0.10 on the foreign exchange market. By November, they were down to $0.07, a decline of 30%. Explain the fall in the price of a peso using supply and demand curves. In words, explain the equivalent rise in the price of a dollar.

Step-By-Step Solution

11-1 Explain the Peso Devaluation

Demand for pesos is driven largely by US consumers who want to buy Mexican imports.  During this time period, the US stock market began to crash, and consumers stopped consuming so much.  This led to a big decline in demand for pesos, i.e., Americans who were selling dollars to buy pesos.


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