The Big Mac Index: A Funny Look at the World’s Currencies

I was having lunch with my 14-year-old daughter and her friend yesterday at a McDonald’s in Bogotá, Colombia. We had just spent three hours driving from our hometown, and we were all starving. I ordered three Big Mac meals, and as we were eating, I started to explain the Big Mac Index to them.

“You see,” I said, “the Big Mac Index is a way of measuring the purchasing power parity between different countries. The idea is that if the price of a Big Mac is the same in two countries, then the currencies of those two countries are also at parity.”

My daughter and her friend looked at me like I was crazy. “What the hell is purchasing power parity?” my daughter asked.

“It’s a fancy way of saying that if a Big Mac costs the same in two countries, then you can buy the same amount of stuff with the same amount of money in both countries,” I said.

“So, what’s the point?” her friend asked.

“The point is that the price of a Big Mac can vary significantly from country to country,” I said. “That’s because the cost of living, taxes, and the strength of the currency can all affect the price of a Big Mac.”

Of course, there are a few things to keep in mind when using the Big Mac Index. First, the price of a Big Mac can vary depending on the size of the burger, the toppings, and the taxes in a particular country. Second, the Big Mac Index doesn’t take into account other factors that can affect the cost of living, such as housing, transportation, and healthcare.

But even with these limitations, the Big Mac Index can be a fun and informative way to learn about the relative value of different currencies.

“So, what’s the cheapest Big Mac in the world?” my daughter asked.

As we were eating our Big Macs in Bogotá, I started to look up the prices of Big Macs in other countries. I was surprised to learn that the most expensive Big Mac in the world is in Switzerland, where it costs about $6.82. The cheapest Big Mac in the world is in Venezuela, where it costs about $1.43.

My daughter and her friend were amazed by these price differences. They couldn’t believe that a Big Mac could cost so much more in one country than in another. We started to talk about what it would be like to live in a country where a Big Mac was so expensive.

We also talked about the implications of the Big Mac Index for the global economy. We discussed how the index can be used to measure the strength of a country’s currency and to identify countries that may be undervalued or overvalued.

We had a lot of fun learning about the Big Mac Index, and we all learned a lot about the global economy. I’m glad I had the opportunity to share this information with my daughter and her friend.

Here are the current Big Mac prices in some select countries:

• Switzerland: $6.82
• Venezuela: $1.43
• Bogotá, Colombia: $4.50
• New York City: $5.75

As you can see, the price of a Big Mac varies significantly from country to country. This is due to a number of factors, including the cost of living, taxes, and the strength of the currency.

The Big Mac Index is a fun and easy way to learn about the relative value of different currencies. It’s also a good way to start a conversation about the global economy. So next time you’re at McDonald’s, be sure to ask your server about the Big Mac Index. You might be surprised by what you learn.

The Big Mac Index was invented by The Economist magazine in 1986 as a joke. But it turned out to be a useful tool to measure how much a currency is worth compared to another. The idea is simple: if a Big Mac costs the same in every country, then the exchange rates are fair. If not, then some currencies are overvalued or undervalued.

According to the latest Big Mac Index published in January 2023, a Big Mac costs $5.15 in the US, but only $2.67 in Colombia. That means the Colombian peso is undervalued by 48% against the US dollar. On the other hand, a Big Mac costs $7.26 in Switzerland, which means the Swiss franc is overvalued by 41% against the US dollar.

You can find the full list of Big Mac prices and currency valuations here: https://www.economist.com/big-mac-index