The Big Mac Index

Economics boring? Absolutely not, because the Big Mac Index is the most fun way to determine a country’s purchasing power. And yes, we really are talking about McDonald’s Big Mac.

We used to go to McDonald’s during our free periods without fail. A brief escape from school to stuff yourself with junk food. But did you know that we can learn an important economics lesson from the Big Mac? A country’s purchasing power can be determined by the price of a Big Mac in that same country.

How does that work? Well, the price of a Big Mac in US dollars is compared with the price of a Big Mac in other currencies. This shows how much a Big Mac costs in different countries and, therefore, what the exchange rate is. Of course, there are easier ways to calculate an exchange rate (one word: Google), but in the ‘did-you-know’ category, this one is quite fun.

It may seem like rather a random unit of measurement, a Big Mac, but in practice it is not too bad. In fact, this burger contains the most basic products used by every country: meat, bread, lettuce, labour and electricity. All those costs come together in the Big Mac, making the price of this classic a fairly good reflection of a country.

The Big Mac Index was invented by The Economist in 1986 and is established twice a year. Free bonus fact: there is also a Tall Latte Index, based on the price of a cup of coffee at Starbucks.