Where Burgernomics Began!
The Big Mac Index was introduced in The Economist magazine in September 1986. The Big Mac Index gave rise to the word burgernomics.
The Big Mac Index is an interactive tool featured on The Economist magazine website that allows you to compare the purchasing value of a countries currency via the cost of an identical item, the Big Mac hamburger.
After a Big Mac is repriced according to each countries currency, theoretically, the Big Mac from each country should be exactly the same price. But they never are, one being more expensive than the other. After the re pricing calculation the country with the more expensive Big Mac indicates that countries currency is undervalued as it takes more of that currency to buy the same identical Big Mac hamburger.
The Big Mac Index is a tongue in cheek measurement that has many flaws, exceptions and assumptions....so it mirrors normal economics, which is also full of flaws, exceptions and assumptions. That's what makes the index brilliant. It provides a rare opportunity to enjoy economics without being too serious.
The chart below is the The Economist's explanation of how The Big Mac Index works.
