The Big Mac Index uses Purchasing Power Parity (PPP) in comparing the price of the ubiquitous Big Mac across countries relative to its price in the USA. PPP refers to the idea that exchange rates across two countries should be equal to the relative price of a basket of goods and services in both countries.

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The ubiquity of the sandwich worldwide has proven to have economic importance as well, as The Economist magazine has run its Big Mac Index since 1986, which compares the price of the Big Mac across countries to value currency.

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Thus the price of a Big Mac, a good that is (somewhat) identical across countries, would be an effective barometer of what exchange rates between countries should look like.

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Hamburger-lovers in China had better enjoy them while the good deal lasts at less than half the price, in dollar terms, of an American Big Mac.

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While it makes sense for The Economist to compute a Big Mac Index for a product that is basically the same wherever it is sold, price comparisons of services that are highly differentiated across countries are less revealing.

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