What many people don’t know: The Big Mac from McDonald’s is not only one of the best-known and most popular burgers in the world, but also plays an important role for economists. Since 1986, the double-decker bun with its iceberg lettuce and two meat patties has been satisfying hungry mouths and is also used to measure purchasing power.
The so-called Big Mac Index was devised by the British business magazine The Economist, which has been publishing it twice a year for more than 35 years. The burger from the fast-food chain is a suitable benchmark for assessing purchasing power and thus the cost of living and price levels in a country. McDonald’s sells its most popular dish in over 120 countries worldwide without making any major changes to the recipe. The product virtually conforms to a global standard. Ingredients, composition, quality and size are firmly prescribed. At the same time, the Big Mac is cheap enough to be bought by as many people as possible.
The price of the burger as a basis
To do this, the magazine uses the price as a basis, converting it into U.S. dollars on the cutoff date to make it easier to compare. In this way, it can be seen in which countries people tend to pay more or less for a Big Mac and conclusions can be drawn about the price level compared with other countries. The Big Mac Index was last updated in January 2022.
According to the study, the Big Mac cost an average of $5.81 in its home country not quite half a year ago. This put the USA in third place among the most expensive countries. Only in Switzerland and Norway did the fast-food burger cost more, at the equivalent of 6.98 and 6.39 US dollars. In the euro zone, the average price was 4.42 euros, which was equivalent to 4.95 U.S. dollars at the time of the survey. The countries of the European common currency thus landed in the top third of the most expensive Big Mac regions. Romania, as a rather poorer EU country, is significantly below with a dollar price for the Big Mac of around 2.40 US dollars.
The burger was cheapest in Russia in January, where people had to pay the equivalent of 1.74 U.S. dollars for it. But Turkey is also below the 2-US-dollar mark at 1.86 US dollars.
Purchasing power estimation
If the converted price of a Big Mac is higher than that in the U.S., the currency is considered to be overvalued. If it is lower, the currency is undervalued. Prices in such a country then tend to be lower, and with them the purchasing power there. The higher the converted Big Mac price, the stronger the purchasing power is valued.
Of course, this is only a rough estimate, because other factors, such as the wage level or the cost of logistics, also have a major influence on the price of the burger and are not taken into account in the index.
In any case, the Big Mac price is not entirely comparable: in India, chicken is used instead of beef.
The Top 10 Big Mac Index (as of January 2022)
- 1st switzerland: 6.98 US dollars
- 2nd norway: 6.39 US dollars
- 3th USA: 5.81 US dollars
- 4th Sweden: 5.79 US dollars
- 5th uruguay: 5.43 US dollars
- 6th Israel: 5.35 US dollars
- 7th Canada: 5.32 US dollars
- 8th Eurozone: 4.95 US dollars
- 9th Great Britain: 4.82 US dollars
- 10th Denmark: 4.82 US dollars