Why is the price of McDonald’s so important in different parts of the world?
Because many believe that by following the price of Bio Mac you can understand the current growth trend and the purchasing power of the local currency.
The reason is that to estimate the price of a popular roastery, franchise owners must take into account various economic factors such as the cost of labor, transportation, food and general inflation.
And it’s not like you can find hot water. The Big Mac Index was introduced by Economics editor Pam Woodall in 1986 as a way of purchasing power parity (PPP). Simply put, PPP allows you to compare the cost of living in different countries and regions, taking into account the local currency’s purchasing power.
What Woodall never imagined, what started as a humorous exercise to explain how currencies work, is now a technique that is used to analyze the behavior of currencies in many countries around the world.
The principle is that because the Big Mac is sold in many countries and has the same basic ingredients, its price is relatively the same all over the world. So if the price of a Big Mac is higher in one country than in another, the currency of that country is valued according to the ratio of the country where the Big Mac is cheaper.
Let us take the example of Brazil to explain it in a practical way. To interpret the price of a Big Mac in the United States and Brazil using the Big Mac Index, we calculate the tacit exchange rate between the US dollar and the Brazilian real. To do this we divide the price of a Big Mac in Brazil by the price of a Big Mac in the United States: $2.36 / $5.35 = 0.441. That means, according to the Big Mac Index, the tacit exchange rate between the US dollar and the Brazilian real is 0.441. Since the real exchange rate between the US dollar and the Brazilian real is about 5.25 dollars, we can conclude that the Brazilian real is undervalued against the US dollar.
CashNetUSA wanted to take a look at the world economy and for this they reviewed the annual McDonald’s report, which more than 40,000 stores worldwide and where the iconic Big Macs are sold. Then he analyzed the cost of purchase in each country. using the head as a point.
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To determine the price of the Big Mac, McDonald’s websites and food apps were explored in each country. He then converted the prices from local currency to US dollars and generated the results on maps and charts.
This just comes to this list with the most expensive and cheapest McDonalds in the world. We must remember that the Mac-index is not an official economic indicator, but a quick and simple way to compare the prices and power of different countries.
Sources: CashNetUSA, Nypost, McDonald’s, Scope, Cnbc, Odi.