The Big Mac Index is an informal economic indicator The Economist has published twice a year since 1986. It compares the price of a single Big Mac across countries. Why the same burger costs different amounts of money tells you a lot about whether a currency looks over- or under-valued.
What PPP means, plainly
Purchasing Power Parity (PPP) asks: "how much is the same basket in each country?" If a Big Mac costs $5 in the U.S. and ₩5,000 in Korea, the implied exchange rate is 1 USD = 1,000 KRW. If the market rate is 1,350, the won is roughly 26% undervalued on that burger basis.
The index is a playful way to feel PPP. One row of data gives a quick read on where a currency theoretically sits.
Fun cases
Switzerland: the world's most expensive Big Mac (~$7–$8) — a structurally strong franc. Japan: relatively cheap for years, made more striking by recent yen weakness. United States: the reference, $5–$6. Egypt and India: much cheaper in local currency than in the U.S. — though still meaningful relative to local incomes.
Where it breaks down
It is an intuition tool, not a precision FX model. Four limits:
Labor costs differ. Lower-income countries naturally see cheaper Big Mac production.
Rent and tax structures. Pricey retail real estate (Switzerland, Hong Kong) raises prices.
Cultural demand. In markets where burgers are treated as premium dining, prices run higher.
Input prices. Beef and wheat costs filter through.
That's why The Economist also publishes a GDP-adjusted Big Mac Index — factoring in income makes the signal more realistic.
Using it properly
Don't take a single snapshot — look at multi-year movement.
Triangulate with nominal FX, CPI, and cost-of-living indices.
For personal travel/spending decisions, local wage vs. price is often more useful than the index.
On the quiz
Our Big Mac Quiz compares two countries' USD-converted Big Mac prices. Repeated play builds a structural sense of "this country tends to be expensive/cheap," which grows into PPP intuition — and exchange-rate news starts reading differently.
※ Educational indicator explainer — not a recommendation to trade FX.
