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Travel Detective Blog: Understanding the Big Mac Index

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Exchange rates only tell you so much. Understanding the cost of basic goods and services in a country goes a long way toward creating an accurate travel budget. One of the tools Peter uses to do that is The Economist’s Big Mac Index. Read his latest blog to see why he uses it as a test of a local economy.

People often want to know how expensive it is to visit another country- from how much a hotel costs to car rentals to going out for a night. There are all different metrics you can apply, but I don’t adhere to the standard ones.

Why? When you’re trying to budget your travel don’t just go by how much the hotel costs will be because many countries allow their own individual private enterprises to adjust prices for foreign tourists.  Even in the worst of times with the Euro dropping, hotel rates are still high because they adjust it for foreigners.  What they can’t adjust are the prices of the basic goods and services that are applicable to their own citizens.

For example, in Argentina a taxi ride from the airport averages $6 whereas a taxi ride from Kennedy Airport could run you up to $60!

I like to go by basic goods and services such as toothpaste or shampoo. My favorite metric is the Big Mac Index.  The Big Mac index lets you go from country to country to get a sense what their basic goods and services will cost you.

How much does a Big Mac cost around the world?  The numbers here are actually quite staggering. A Big Mac in the US is $4.20, but the most expensive Big Mac in the world goes to Switzerland at $6.79.  Norway is right behind them at $6.7o .  Where is the cheapest Big Mac in the world?  India at $1.62.

Most Expensive Big Macs Around the World
1.     Switzerland $6.81
2.     Norway $6.79
3.     Sweden $5.91
4.     Brazil  $5.68
5.     Denmark $5.37

Least Expensive Big Macs Around the World
1.     India $1.62
2.     Ukraine $2.11
3.     Hong Kong $2.12
4.     Malaysia $2.34
5.     China $2.44

What is your favorite travel metric? How do you determine your budget abroad?

For more travel budget ideas, check out:

By Peter Greenberg for PeterGreenberg.com

*All figures and conversions are taken from The Economist’s “The Big Mac Index”. Jan 12th 2012.

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