Burgernomics is an entirely real economic tool created by The Economist in 1986 to measure purchasing power parity using the price of a McDonald's Big Mac.

How a burger becomes a currency comparison

Purchasing power parity, or PPP, is the idea that exchange rates should eventually make comparable goods cost roughly the same across countries. The Big Mac gives that idea a simple, if imperfect, test: compare its price in a country with its price in the United States, then ask what exchange rate would make those prices match.

Suppose a burger costs the equivalent of more in one country than it does in the United States at the current exchange rate. The comparison suggests that country’s currency may be expensive relative to the dollar by this measure. If it costs less, the currency may look cheap. This is an estimate of the gap between prices—not a forecast that the exchange rate will promptly move to close it.

What the burger captures—and misses

A Big Mac is useful because it combines many local costs in one familiar product: ingredients, labor, rent, utilities, and other parts of running a restaurant. Some costs, especially wages and storefront rent, cannot be traded internationally as easily as raw materials can. They can therefore make prices differ across countries even when currencies are not simply “mispriced.”

The comparison also assumes that the burgers are similar enough to stand in for one another. But a single fast-food meal is not a representative basket of everything households buy. Local taxes, supply chains, competition, and consumer demand can all affect its price.

A signal, not a verdict

That makes the measure most useful as an intuitive check on a much larger economic question. It shows how far everyday prices can diverge when translated into one currency, while reminding readers that exchange rates reflect more than the cost of a sandwich. Its memorable unit is the point: a complicated currency comparison becomes something people can picture—and argue about—over lunch.