“A Pizza Hut a Pizza Hut Kentucky Fried Chicken and a Pizza Hut
A Pizza Hut a Pizza Hut Kentucky Fried Chicken and a Pizza Hut
McDonald’s McDonald’s Kentucky Fried Chicken and a Pizza Hut
McDonald’s McDonald’s Kentucky Fried Chicken and a Pizza Hut”
For those who don’t recognise this lyrical masterpiece, in 2003, a walking advertisement of a song imaginatively called “The Fast-Food Song” made it to Number 2 in the UK charts. It featured poetic verses such as:
“I want it, I need it
Nothing else can beat it
Hot and spicy
Whenever I’m in town (mmm mmm)”
The likelihood is you are either involuntarily recalling the dance that went along with this song or you are beginning to question your existence and how society got to this point (or both). The answer, of course, lies in the formidable force of the fast-food industry. Since its inception, fast-food has circulated its way around the globe, leading to the creation of many household names. McDonald’s alone owns a staggering 38,695 restaurants and counting. With stats like that, is there any surprise that a song about eating fast-food became a bop? Whilst the individual fast-food menu items have become familiar faces to many of us, the most recognisable item among them all is, unquestionably, The Big Mac.
This slab of bread and meat, supposedly concocted to stave off the hunger of steel workers that frequented the nearby Uniontown McDonald’s (Pennsylvania, 1957), is the restaurants best selling item, second only to their French fries. The Big Mac has become a representation of capitalism and is so recognisable that even The Economist have created their own Big Mac Index, as an informal way to compare the power of currencies.
Whilst it is meant light-heartedly, a Big Mac Index actually makes a great deal of sense. McDonald’s is practically omnipresent. It exists today in 118 countries and the standard McDonald’s menu items (such as the Big Mac) are produced to the same set of standards worldwide. A Big Mac in Lebanon should be the same as a Big Mac in London. Given this, the Big Mac is a really well positioned measure to compare the buying power of currencies (in other words, how many Big Macs can your money buy in various countries?). This is a concept known as purchasing power parity.
How many Big Macs can your money buy?
Take £100, slap it on the counter of a UK McDonalds, and ask for as many Big Macs as your money can buy. A UK Big Mac sells for £3.19, meaning you’ll be met with a pile of 30 burgers and have a bit of change left over.
This experiment can be repeated in every country where Big Macs are available by exchanging £100 and using the new foreign currency to buy all the Big Macs you can. Let’s take a look at what happens in a few countries. Any guesses where the most expensive Big Mac is before it’s revealed in the options below?
Big Mac Price: £3.29
Big Mac Quantity: 30
£100 exchanges for:
Big Mac Price: €4.12 (£3.67)
Big Mac Quantity: 27
£100 exchanges for: $137
Big Mac Price: $5.66 (£4.13)
Big Mac Quantity: 24
£100 exchanges for: 883 Chinese Yuan
Big Mac Price: CNY 21.50 (£2.37)
Big Mac Quantity: 41
Where can UK money buy the most Big Macs?
£100 exchanges for 10,090 roubles
Big Mac Price: 135 roubles (£1.34)
Big Mac Quantity: 75
Note: Lebanon (Feb 2021) is likely to be the nation where the UK pound is the most powerful. However it is currently in an economic crisis and suffering from hyper-inflation in certain industries (particularly any food related industries). This, coupled with a fluctuating exchange rate, means it’s hard to accurately conclude the purchasing power of UK pounds in Lebanon.
Where can UK money buy the fewest Big Macs?
£100 exchanges for: 123 Swiss Francs
Big Mac Price: SFr 6.5
Big Mac Quantity: 18
The Power of the UK Currency
According to the Big Mac Index, the UK pound is most powerful in Russia especially for those who have a hankering for a delectable luncheon and a spare £1.34. This experiment captures the theory of purchasing power parity which translates to: how far your money can stretch. It goes a long way to explaining why some products and services, such as Big Macs and many others, can vary in price and also why they can be so much cheaper in developing or unstable nations. So, before you rush off to book that Russian holiday, here are some of the reasons that can explain this oddity.
- Preferences and Tastes: Some cultures might simply like McDonalds more than others and consume it more frequently. Preference creates demand, which means higher prices can be charged for the Big Mac.
- Macroeconomic Conditions: Economic differences in stability, average wages, land prices, education and training (among others), can inflate the cost of production. In this case, the costs of making the Big Mac in each country needs to be covered by charging the appropriate price.
- Consistency in Quality: The quality of any product or service can vary depending on where it is produced due to inconsistencies in raw materials and labour which can be reflected in the price. The Big Mac may not be affected by this as much due to McDonalds standardised approach.
- Tradability: The price of a good is more consistent across countries, if it can be easily and cheaply transported. A freshly prepared Lebanese Big Mac however, does not travel well (and may not quite make it to the UK in the same condition), meaning price differences can appear. And anyway, Uber Eats and Deliveroo don’t stretch quite that far… yet!
I leave you with this:
Note: All exchange rate and price data were collected for the 12th January 2021 in order to remain consistent with when the complete Big Mac Index was last updated.
References and Acknowledgments
 Readers Digest
 The Economist
Source: Big Mac Image
Source: Big Mac GIF
Source: <a href=”http://<div>Icons made by <a href=”https://www.freepik.com” title=”Freepik”>Freepik</a> from <a href=”https://www.flaticon.com/” title=”Flaticon”>www.flaticon.com</a>Burger Icon
Source: Fast Food Song