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Friday, November 10, 2006
Big Mac Index

Big Mac Index
The Big Mac index was introduced by The Economist newspaper in September 1986
as a humorous illustration and has been published by that paper annually since then. The index also gave rise to the word burgernomics.

Burgernomics is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country. The Economic "basket" is a McDonald's Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPP's indicates whether a currency is under- or overvalued.

For example, suppose a the price of a Big Mac is $2.50 in the United States and £2.00 in the United Kingdom; thus, the PPP rate is 2.50/2.00 = 1.25. If, in fact,

the US dollar buys £0.55 (or £1 = $1.81), then the pound is over-valued (1.81 > 1.25) with the respect to the dollar by 44.8% in comparison with the price of the Big Mac in both countries (information as of 2005).
 
posted by Fuzzy at 7:12 PM | Permalink |


18 Comments:


  • At November 10, 2006 10:16 PM, Blogger العين الساهرة

    nice info, see how people work?exactly same as people in Kuwait.

     
  • At November 10, 2006 11:03 PM, Blogger kila ma6goog

    يبيله جوني روكتس اندكس

     
  • At November 10, 2006 11:48 PM, Blogger UmmEl3yal

    Interesting !

    But how does that take into account the overheads and taxes in each country?! The realestate in UK is much higher than the US, so the location cost (rent/purchase) will effect the product price and profit margins. Other countries pay taxes for US goods, that will reflect in the price too. Doesn't it?

     
  • At November 11, 2006 2:08 AM, Anonymous Anonymous

    walla nas etfakeer wa teeshte'3eel moo rabe3na !

     
  • At November 11, 2006 2:11 AM, Blogger dilli o milli

    This index started 1986 and it is yearly published till 2005, only for MC ?!!
    Ok u said it started as a humorous illustration, but its still going on, dose this index considered as an advertisement for MC?! If yes, then who pays the bill?!

    * I HATE MC AND I LOVE WIMPY...I really MISS the old WIMPY in Salmiya :(

     
  • At November 11, 2006 10:30 PM, Blogger UmmEl3yal

    D&M .. Laish 6ari 3lala balich Wimpy hal ayam? My favourite branch was el Khalidiya one!! What happened to them?

     
  • At November 11, 2006 11:48 PM, Blogger dilli o milli

    ummel3yal

    هاااهاااهااا..أي ي حبيبتي طرى علي..بس مو مال الخالديه أفا عليج..هذى مو مثل مال أواخر السبعينات اللي كان موجود بالسالميه!! اللي صمونته لا كليتيها جنج ماكله
    Marshmallow
    :)
    وكنت أكله في لندن كان موجود في أكسفورد
    :)

     
  • At November 12, 2006 9:43 PM, Blogger UmmEl3yal

    Fuzzy & Witty I'm worried about you two. Are you alright? Hope all is fine!

     
  • At November 12, 2006 10:54 PM, Blogger Fuzzy

    weird that even when it comes to economics, i related my post to food ! bugernomics !

    by the way, the Big mac is a very accurate and a handy tool for economists around the world :)

    in many countries, they compare certain items to evaluate the poverty line and the minimum amount of income required to stay alive, and in kuwait, i think they use rice,oil,flour...etc ( about 20 items) as an indicator.

     
  • At November 12, 2006 10:58 PM, Blogger Fuzzy

    ummel3yal :)


    witty is away for the weekend , and i am currently overwhelmed by the amount of work load ! guess by next week ill take a long break :)

    thanks for checking up on us, how u doing ? dont watch too much news, i gave up reading Kuwaiti newspapers, and also stopped watching all news channels, im tired of reacting to negative news all the time

     
  • At November 12, 2006 11:00 PM, Blogger Fuzzy

    dilli_o_milli


    its an index by the Economist magazine, the one in my post is dated March 2006.

    and Big Mac is sold in over 120 countries, dont you think its a fair comparison tool ?

     
  • At November 13, 2006 12:06 AM, Blogger UmmEl3yal

    Fuzzy Buzzy,

    I'm glad you're both ok :) I can't help elem7atat :)) Typical 3yooZ!

    Take a break ,, take a KitKat ;)

     
  • At November 15, 2006 9:28 AM, Anonymous Anonymous

    Interesting topic Fuzzy.

     
  • At November 15, 2006 9:03 PM, Blogger Bella Color

    very interesting...

    i must say, that last thing i expected to hear about is 'burgernomics'...

     
  • At November 17, 2006 2:28 AM, Blogger dilli o milli

    Fuzzy !!!

    وينك !! ؟؟؟ عسى ما شر !!! ؟؟؟؟

     
  • At November 17, 2006 5:11 AM, Blogger blacklight

    Hmmmm I wonder what happened to this Index after the release of my favorite documentary of all Time "Super Size me" (personally that movie made me eat or McDonalds’ than I ever imagined lool;))
    Excellent topic Fuzzy way to go bro.

     
  • At November 21, 2006 1:42 AM, Blogger الكويتي الحر

    فزي

    جدد
    عسى ما شر ؟

     
  • At November 24, 2006 6:54 PM, Anonymous Anonymous

    اعزائي ... ما زال التصويت مستمر لتقييم المدونين ..?


    http://dirty-wind.blogspot.com/

    شاركنا الآن ...

     

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