Big Mac index for June 2020

Calculating Big Mac index for June 2020
A Big Mac costs £3.39 in Britain and US$5.71 or 3.39/5.71 = .59
At the same time the exchange rate was $1 = £0.79 , so US$5.71 would get you £4.51

So if we consider a Big Mac an essential purchase, the British pound is undervalued by (.59-.79)/.79= 25.1%

Repeating that calculation for some primary currencies, and for some peso currencies we get.

Switzerland Franc +20.9%
United States US$ 0% BASE CURRENCY
Canada C$ -11.1%
Euro area Euro -16.2%
Australia A$ -19.8%
Britain Pound -25.1%

Uruguay Peso -24.2%
Argentina Peso -38.5%
Chile Peso -39.1%
Colombia Peso -42.4%
Philippines Peso -49.7%
Mexico Peso -61.0%

This famous study of purchasing power parity has been going on for 34 years. It was meant to be more of a teaching tool, but it is widely quoted.

My question is does this calculation show anything meaningful?


McDonalds came to Mexico in November 1985 where it is wildly overpriced compared to native food. Labor is relatively cheap in Mexico.
On Oct 31, 2020 $5.71 exchanges to 121 Mexican pesos.

A basic "comida corrida" (food on the run) or four course cheap lunch with unlimited drink served between 2:00 and 4:00 in the afternoon in Mexico city is about 58 pesos (and much cheaper in a smaller city).

There is no way that a Big Mac could sell for more 50 pesos.

Quote: Pacomartin

My question is does this calculation show anything meaningful?

It does. For example, we often hear how much higher the minimum wage is in Australia to name one place. But without context what does it matter?

Similarly, any American who has hopped across the Canadian border for an afternoon sees how hard making a conversion can be. Most of my life I have gotten about 25% more C$ than USD. It is generally accepted that most prices are higher in Canada.

But the higher prices are hard to translate in the big picture. Even with how common Canadian and USA products are, not all is exact. If you try to compare with a grocery cart from each nation, you will have to compromise here and there. If you compare USA to EU it is worse, US to S Korea, fugheddabaddit.

OTOH, a Big Mac is a Big Mac the world over with minor exceptions like India. Not only is the product identical, the retailer is.

While it is not perfect, it is about as good as you will get.

I can’t remember buying a Big Mac for the list price. Always 2 for $5, buy one get a free drink, or free Nuggets with purchase or some such. Plus we get coupons mailed to us which have other type offers.... I don’t think these offers are as prevalent in Europe, from my recollection.

Had one bite of a Big Mac 40 years
ago and spit it out. It has some
kind of sickeningly sweet sauce
on it and I don't eat sugar. Yuck.
I'd eat a lettuce wrap Whopper
any day.

Quote: Evenbob

Had one bite of a Big Mac 40 years
ago and spit it out. It has some
kind of sickeningly sweet sauce
on it and I don't eat sugar. Yuck.
I'd eat a lettuce wrap Whopper
any day.

I have never had a Big Mac. I only eat plain burgers with nothing except for cheese. Condiments to me are disgusting. I eat dry hot dogs and hamburgers.

The price of a Big Mac varies from location too. It's $4.89 at my McDonald's. And $6.39 at SeaTac airport. $6.09 at the one closest to the Space Needle. $5.79 by Fisherman's wharf in San Francisco.

Quote: DRich

I have never had a Big Mac. I only eat plain burgers with nothing except for cheese. Condiments to me are disgusting. I eat dry hot dogs and hamburgers.

OMG
I get all the good stuff on it making it a more healthy meal and it tastes better. Lettuce and tomatoes

I actually remember the first Whopper
I had, it so impressed me. It was DT
Grand Rapids and my mom bought
it for me in 1964, 39 cents. It was
the most fabulous burger I had
ever eaten up to that point. I had
to beg her, 39 cents was a huge
amount when you could get a
McD for 15 cents.

Quote: terapined

OMG
I get all the good stuff on it making it a more healthy meal and it tastes better. Lettuce and tomatoes

In general I don't eat fruits or vegetables. I only want to taste the meat and cheese, everything else covers it up. That is also why I don't use conddiments, it masks the taste of the food.

I do plan on having a piece of Key Lime pie in Key west next week. That is the extent of my fruit eating for the year.

Quote: DRich

In general I don't eat fruits or vegetables. .

They are very bad for you. Stick
to fats and starch and sugar, that's
the ticket. And lots of salt.