Let's know all about Big Mac Index which was recently in news in TheHindu newspaper.
1) A British Magazine "The Economist" has been publishing the Big Mac index since 1986. It was introduced by Pam Woodall.
2) What is the purpose of Big Mac Index ?
The Big Mac index compares the price of the Big Mac burger across countries, which helps to measure purchasing power parity between two currencies.
It provides a test of the extent to which market exchange rates result in goods costing the same in different countries.
3) The Big Mac index is used to compare the price of a good across countries.
The law of one price states that the price of a good sold internationally should converge as entrepreneurs try to profit from any price discrepancy.
4) Drawback of the Big Mac index:
Goods that look physically similar to each other may not necessarily be similar in their economic nature.
5) Index gave rise to the word "burgernomics".
6) Some of the variants of Big Mac index produced on the same theme are:
i) Tall Latte Index: replaced Big Mac burger of Mac Donald's with a cup of Starbucks coffee in Jan 2004.
ii) iPod index: Launched in 2007 by an Australian Bank comparing cost of iPod across various countries but its drawback was that it didn't considered Shipping cost which varies country by country.
iii) Billy index: Introduced by Bloomberg L.P where they convert local prices of IKEA's Billy bookshelf into US dollars and compare the prices.
Big Mac Index
1) A British Magazine "The Economist" has been publishing the Big Mac index since 1986. It was introduced by Pam Woodall.
- Published annually since 1986.
2) What is the purpose of Big Mac Index ?
The Big Mac index compares the price of the Big Mac burger across countries, which helps to measure purchasing power parity between two currencies.
It provides a test of the extent to which market exchange rates result in goods costing the same in different countries.
3) The Big Mac index is used to compare the price of a good across countries.
The law of one price states that the price of a good sold internationally should converge as entrepreneurs try to profit from any price discrepancy.
4) Drawback of the Big Mac index:
Goods that look physically similar to each other may not necessarily be similar in their economic nature.
5) Index gave rise to the word "burgernomics".
6) Some of the variants of Big Mac index produced on the same theme are:
i) Tall Latte Index: replaced Big Mac burger of Mac Donald's with a cup of Starbucks coffee in Jan 2004.
ii) iPod index: Launched in 2007 by an Australian Bank comparing cost of iPod across various countries but its drawback was that it didn't considered Shipping cost which varies country by country.
iii) Billy index: Introduced by Bloomberg L.P where they convert local prices of IKEA's Billy bookshelf into US dollars and compare the prices.
iv) Gold-Mac-Index:
The value of the purchasing power for 1g of gold i.e how many burgers one got for
1g gold.
v) The Chai Latte Global Index: Launched in
2017 by the comparison platform Versus, which compared Starbucks Chai Latte prices worldwide, by first converting
the local prices into USD.
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