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What is the Big Mac Index?

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From the sale of McDonald's Big Mac worldwide, you can obtain data on the cost of living in each country and the development of their currencies

What is the Big Mac Index?

The prestigious magazine The Economist created 32 years ago an informal index to calculate the purchasing power of 56 countries in which the indicator is the famous McDonald's hamburger, Big Mac. In recent years, comparative indexes have been created with products such as the Tall Starbucks Latte or iPad, however, the truth is that in almost every place in the world can be found a McDonald's and because of its popularity and consumption. Comparing the price of the famous hamburger in each country works very well to have clues about the cost of living and to know if a currency is overvalued or undervalued in relation to the US dollar. The figures that have helped to obtain this data are: 36,000 establishments and 68 million customers per day.

Leer en español: ¿Qué es el Big Mac Index?

How does it work?

The way in which the index works is comparing each local currency with the US dollar, this responds to the theory of purchasing power parity (PPP), which postulates that in all countries the same number of goods and services must be acquired that can be purchased with the dollar.

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The way in which the calculation is made is taking the value of a Big Mac in a certain country to compare it with its price in dollars. If the local price is far from the official price of the hamburger, or more specifically, if the official exchange rate between the local currency and the dollar differs a lot from the price ratio between the two hamburgers, the currency is said to be undervalued. However, the calculation also influences factors such as the minimum or average salary in each country and the fluctuations of each local currency.

In which country is it more expensive and cheaper to eat a Big Mac?

According to the index published this year, the world country in which the hamburger is cheaper is Ukraine, where it costs 1.64 dollars compared to the 5.51 dollars it costs in the United States. Followed by Egypt (1.93), Malaysia (2.28), Russia (2.29) and Taiwan (2.33). On the other hand, the countries where the hamburger is more expensive are Switzerland (6.76), Norway (6.24) and Sweden (6.12).

The countries where a Big Mac costs less:

1. Ukraine: $ 1.64

2. Egypt: $ 1.93

3. Malaysia: $ 2.28

4. Russia: $ 2.29

5. Taiwan: $ 2.33

In Latin America, the country in which the hamburger is more affordable is Mexico, where it costs 2.57 dollars, so it would be said that this is the country that has the most undervalued currency, while the countries in which the hamburger is more expensive, or where the currency is less undervalued are Brazil and Uruguay, where the price of the Big Mac is 5.11 and 4.90 respectively. One of the few countries that has a price equal to the American Big Mac is Canada, where the difference between prices is little cents

The countries where a Big Mac costs more:

1. Switzerland: $ 6.57

2. Sweden: $ 5.83

3. United States: $ 5.51

4. Norway: $ 5.22

5. Canada: $ 5.08

Finally, through this index you can also find out how many hours of work are required to earn the equivalent of the cost of a Big Mac in local currency. This new appreciation of the index allows us to know about how average incomes and purchasing power in a country are compared with those of the United States.

In this category Hong Kong leads, because in this country only 8.6 minutes of work are needed to earn what it takes to buy a Big Mac. Hong Kong is followed by Luxembourg, Japan, Switzerland and the United States, where it takes between 10 and 11 minutes of work on average to collect the equivalent of the price of a Big Mac.

On the other side of the spectrum is Kenya, the country with the most hours to work in order to buy this emblematic McDonald's product: 172.6 minutes on average. It is followed by the Philippines, Mexico, Indonesia and Egypt.

 

LatinAmerican Post | María Fernanda Barinas

Translated from "¿Qué es el Big Mac Index?"

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