After converting the price of a Big Mac sold in the foreign country to the USA dollar (using the actual USA dollar exchange rate), we can determine the extent to which the USA dollar is undervalued or overvalued. The base point of the 2011 Big Mac Index model is the US dollar. There are 1,080 calories in a Big Mac® Combo Meal with a medium Coca-Cola® and medium fries. That suggests the South African rand is 57.9 percent undervalued according to the index. Of course, we know the actual exchange rate is between R13.30 and R13.35. That means there is an implied exchange rate of R5.63 cents to the US dollar.
McDonalds Big Mac meal is served with our World Famous Fries® and your choice of an icy Coca-Cola® or other fountain drink. A Big Mac burger costs R31 in South Africa versus 5.51 in the United States. The Purchasing Power Parity (= the exchange rate that equates the price of a Big Mac in two countries) is calculated by comparing the price of a Big Mac sold in the foreign country and expressed in local currency to the price of a Big Mac in US dollars sold in the USA. Big Mac Ingredients include a classic sesame hamburger bun, Big Mac Sauce, American cheese and sliced pickles. That being said, the "goods sold" in the case of the Big Mac Index 2011 is a single product, the Mc Donald's Big Mac hamburger. Based on the Law of One Price, identical goods sold in two markets should sell for the same price. The Big Mac Index 2011 is based on the principle of the Law of One Price and relates to the theory of the Purchasing Power Parity. Up charge for a Side Salad 1.75, a Cup of Chili for 2.25 and Mac & Cheese for 2.50. The Big Mac index 2011 shows how much currencies have deviated in 2011 from their true values. This menu is only available on Friday's Served with choice of Potato Pancakes, Fries, Kettle Chips, Jamaican Jerk Sweet Potato Salad, Street Corn, Veggie Medley or Onion Rings.
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