TWL #6: Big Mac Economics

TWL #6: Big Mac Economics

McDonalds is everywhere. In the contiguous
United States, the farthest you can get from one is this spot in the Sheldon National Antelope
Refuge in Nevada. Even then, you only have to drive 115 miles to the nearest golden arches.
Around there world, there are more than 36,000 locations in 119 different countries. One
of the defining characteristics of McDonald’s is the commitment to consistency across the
brand. While there are regional differences to the menu such as KiwiBurgers in New Zealand
or Chicken Congee in Indonesia, the core menu items such as Big Macs, Chicken Nuggets, and
Fries are always avaliable. That means that the same items are being made in the same
way with the same ingredients in very different economies around the world. Obviously, BigMacs
don’t cost the same everywhere. A Big Mac costs on average $4.79 in the US, so if you
were to charge the equivalent in Kenya, 480 Shilling, nobody would buy it because that’s
double the average daily salary. That’d be like charging $200 for a big mac in the
US. That’s why McDonald’s sets the local price for burgers based on a variety of factors
such as labor costs, rent, ingredient costs, and local income levels. Now for some real
economics. Purchasing Power is the amount of goods you can get for one unit of currency.
Let me explain. In the US, the average price of a Big Mac across all markets is $4.79.
In Sweden, the cost of a BigMac is 44 krona. 44 Krona is equivalent to $5.13. That means
that in the US, you can get 20.8% of a BigMac for a dollar, while in Sweden, you can only
get 19.5% of that burger. So, in terms of the BigMac, the purchasing power of the US
dollar is higher. You get more bang for your buck. This also means that the Swedish Krona
is overvalued in terms of exchange rates by about 6.1%, at least according to the Big
Mac Index. The Economist Magazine first created the index in 1986 as an informal way of comparing
Purchasing Power between currencies. So now let’s look at the numbers. In Venezuela,
the cost of a BigMac is equivalent to $0.66—that’s the cheapest Big Mac in terms of equivalent
US dollars in the world. This is in largely due to recent currency devaluations and high
inflation in the country. It’s possible that the cost of a Venezuelan Big Mac will
soon rise in response. This means that for the cost of one American Big Mac, you could
buy 7 Venezuelan Big Macs. After Venezuela, the countries with the cheapest Big Macs are
Russia, Ukraine, South Africa, and Malaysia. For the other side of the spectrum, the top
five most expensive big macs come from Switzerland, Sweden, Norway, the US, then Denmark. That’s
right, the US is home to the fourth most expensive Big Mac in the world. What’s also interesting
is to look at how long it takes individuals to earn enough money to buy a BigMac in different
cities around the world. In Nairobi, Kenya, an average worker would have to rack up 173
minutes on the clock to pay for one Big Mac. Compare that to an worker in Hong Kong, who
would only have to work 8.7 minutes for a burger. The quickest one can earn a burger
in the US is in Miami, where the average individual would only have to work for 10.7 minutes to
pay for a Big Mac. Now, this index isn’t perfect. While the cost of ingredients is
pretty similar across all countries since all ingredients are held to the same standard,
the index doesn’t account for the wide differences in labor and land costs. A burger will cost
less to make in India because McDonald’s doesn’t need to pay as much for employees
and retail space. Nevertheless, this index is a great way of teaching some basic economics
in a tasty way. I hope you enjoyed this week’s episode.
Last week I covered timekeeping on Mars which you can find here. If you enjoy these videos,
make sure to click subscribe here. Also, please follow me on Twitter @WendoverPro. Thanks
for watching, and see you next Tuesday with more of That Wikipedia List.

100 thoughts on “TWL #6: Big Mac Economics

  1. Great video as always. Just one small point of criticism: the background music in this one was quite a bit too loud, therefore distracting from the actual content. You might want to tone it down a little in the future.

  2. The big Mac index is great and all but what we really need is a ice cream machine functionality index. At the moment the us sits a zero working machines.

  3. so, in this video, you once said that big macs cost 5.13 dollars in sweden, then later in the video, you said that they cost 5.23 in sweden. As of July 2018, it has risen to 5.83. So, did you just make a careless mistake, or did the price of a big mac change between making those two segments of your video?

  4. Differences in land, labour and capital costs are the whole point of this index!

    It's a proxy for calculating purchasing power parity

  5. Surprised Canada's Big Mac isn't more expensive when generally almost everything is cheaper at McDonald's in the US than in Canada.

  6. The 4.79 is not the total cost of the BigMac. The cost of transportation to and from McDs to get there might be $1-2 (not counting the time value). Also, if a hamburger at home costs $1.5, you have spent $4 more than you could have. Because of this, you have lost the value of what to $4 could have bought. This is the lost opportunity cost. It may be that this $4 investment could have made or saved you $10 or much more. So the cost of the BigMac could be at least $10, not counting the time it takes to get there. If you figure in the negative health costs it could cost even more.

  7. I dont think the us is the 4th most expensive big mac. Our big macs are over 6 usd in scotland. Use to be closer to 8 but the GBP is less value'd nowadays

  8. Not true. One of my buddies 12 year old kid can mow a lawn in 5 or 7 minutes and get 2 burgers

  9. Big mac is literally the most disgusting burger I have ever eaten. Tried only a bite and it tasted awful to me.

  10. a bit annoying that you put China's flag on the burger when you are talking about Hong Kong, just use the Hong Kong flag is way more fitting

  11. the people who commented on the chinese flag when he mentioned hong kong are such fucking pussies. its ok, we get it, you dont like their flag. go to sleep now, bunch of sensitive kids. there are even retards who wrote "uNsuBbeD" as if the dude from this channel cared about a single fucktard unsubbing when the ratio of sub/unsub is prob like 32/1.

  12. Well.. in my shitty country Big Mac costs just a little bit less than the US one, while the average salary is about 10 times less. (Hour and a half of work to buy a burger) So that whole concept doesn't really show anything.

  13. I don't how you came up with the cost of big mac in Hong Kong. Big Mac costs about 30 hkd. Average salary in Hong Kong is 14k hkd which is about 72 hkd an hour if you work 8 hours 24 days a month. So you definitely can't get a big mac if you work for 8.7 minutes. Correct me if I am wrong.

  14. I was so angry at the fucking length of this that I spilled my beer. Thats strike 1 wend-over and I only can count to 2

  15. this is intriguing given the popeyes sandwich craze. mind you i don't even eat bread & ive gone vegan, but popeyes was a staple after school, so with all the hype & nostalgia, i wanted to try it. sold out everywhere. so I spent $30 on 10 strips, brioche buns, pickles, mayo to make my own..trash. its the bread, peasant food. i can't tolerate thin pizza dough, but bread is dangerous & my body's too aware of that to ignore it & enjoy it anymore. the strips were nostalgic but they put aluminum in the flour as stabilizer. hello Alzheimers. point is, that hype is a decent sign of economy strength.

  16. If a Big Mac costs $o.66 USD in Venezuela, and the only currency of value that's accepted in Venezuela is World of Warcraft gold, what's the exchange rate?

  17. 3:30 why are you using Chinese flag for Hong Kong? It is not comunistic censorship China and never will be. Hong Kong have their own flag.

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