Relative Purchase Power Parity describes a theory of exchange rates based on the comparison of price levels of two countries. The concept of purchase power parity is the idea that identical goods have the same price in different markets. The price of the goods is equal in each country, therefore exchange rate is calculated with comparing the price of the same good in different countries. Purchasing power of different currencies is equalized for a basket of goods.
Additional meaning of Relative Purchase Power Parity:
The Relative Purchase Power Parity is an expansion of the purchase power parity theory, suggesting that prices in countries vary for the same product but that they differ by the same proportional rate over time. The reasons suggested for this price difference include taxes, shipping costs and differences in product quality