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Why does the price of a Big Mac represent the economy of a country?

Date: June 3, 2023 Time: 23:16:51

Fast food chains with a very handy bet to eat in a short time and for little money, that is why it is common to visit one of these establishments when we are traveling and, for a day, we save a little on food. However, it must be borne in mind that these types of chains are not always so cheap, especially depending on the country in which we are traveling.

The Big Mac Index, developed for decades by ‘The Economist’, analyzes the variation and prices of this famous McDonald’s hamburger throughout the world. Thanks to this statistic, it can be seen how hamburgers are not so cheap in all the cities of the world and how they can cost between one and almost seven euros depending on the nation on which we focus.

Why is this analysis so interesting? Well, because it really shows the purchasing power of the population that is taken as a reference to set the price of the Big Mac. The statista website has prepared a graph with the consolidated data of these prices from the past 2022, although those of the current 2023 are already available under corrections. The prices in the following table are in dollars, but they serve to give us an idea of ​​in which countries a Big Mac is more expensive and, finally, in which countries the purchasing power is greater.

Consolidated Big Mac Index prices in 2022

Find more statistics on Statista

A particularity of this study is that the euro zone tends to be unified under this title. In the nations that share the euro, last year a Big Mac cost about 4.60 euros on average, although obviously this price is not the same in all European countries, which also shows the difference in purchasing power between the different nations of the EU and the eurozone.

Thus, while in Spain a Big Mac cost 4.58 euros last year (being in the 25th position in the ranking), the rest of the countries charged 4.65 euros for this hamburger, with the exception of nations like Switzerland (6, 21 euros), Norway (6.18 euros) and Sweden (5.25 euros), in first, second and fourth position in the ranking, being the countries with the highest prices. The third nation with the highest prices is the United States, with a price of 5.62 euros.

The Big Mac Index Feature

The Economist explains that it invented this index not to create a concrete and reliable guide on prices, but to be a more flexible index on the value of each type of currency in relation to the same more or less basic and affordable product. The theory behind the Big Mac Index is that of purchasing power parity, which argues that in the long term exchange rates should move towards equalizing the prices of an identifying basket of goods and services (in this case, a hamburger ) in two different countries.

So this index has just shown inequalities, purchasing power and economic trends in the different nations of the world. For example, The Economist points out that when a country becomes richer, the price of this hamburger should become more expensive and vice versa, as a general trend, something that does not always happen. In conclusion, this index serves as a guide to understand the relationship between prices and GDP per person.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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