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The Big Mac economyFeatured science projectScience project video

Abstract

This survey was done to discover the relationship between the price of a Big Mac hamburger and the GDP per capita of a country.

Hypothesis

As the GDP per capita of the country increases, the price of the Big Mac also increases.

Scientific Terms

GDP, per capita, foreign exchange rates

Background

Big Mac Index

The Big Mac is a standard burger that is sold in all Macdonald’s franchise restaurants across the world at different prices. The prices seem to be adjusted to suit the affordability of the local consumers (amongst other factors) in a particular country.

Theoretically, since the price of a Big Mac has been fixed based on affordability, demand and supply, it may perhaps, to a certain extent be used to compare and justify the currency exchange rate between 2 countries. For example:

The Big Mac is priced in the USA atUS$2.90, The Big Mac’s price in Thailand = Baht 70

Purchasing Power Parity (PPP) = US$2.90/ 70 = 0.0414

Currency exchange rate: 0.0327 US$ = Baht 1 (estimated)

To calculate whether the Thai Baht is undervalued or not against the US dollar:

(0.0327 – 0.0414)/0.0327 x 100% = -26.6%

A negative figure means that the Baht is theoretically undervalued against the US dollar (in this case, by 26.6%).

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Complexity level:
9
Project cost ($):
10
Time required:
1 day to prepare, 2 days for the science project experiment
Material availability:
Access to the internet
Safety concerns:

NA