The Big Mac Index: Law of One Price vs. PPP
From The Economist, "The Big Mac index (see chart above) is based on the idea of purchasing-power parity (PPP), which says currencies should trade at the rate that makes the price of goods the same in each country." Technically, the Big Mac Index is more of a test of the Law of One Price, an economic law that says "In an efficient market all identical goods must have only one price." Purchasing Power Parity generally applies to a basket of goods.
6 Comments:
I wonder how much of the local prices are taxes? Is it possible to present this data tax-adjusted?
JCarrphion
I think I'd rather vacation in Malaysia than Switzerland. Dollar might last a little longer.
...or how much melamine is in the Chinese burgers... ;-}
Showing Clowns and charts to gether is really poor taste. Don't ever underestimate the creepiness of a Clown
Considering the top countries are Sweden, Norway, and Denmark, I'd bet taxes have something to do with it. I am surprised that it was cheaper in Australia. As for Malaysia, I wonder how much high price items cost there like cars. I've heard there is a high tariff on foreign cars.
Dr..can i ask somthing..what is current price of big mac and Double cheese Burger in US outlet...I ask because u are staying in us,,the data in internet not make me satisfied...I appreciate if u can answer me...thanks
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