Page "Purchasing power parity" Paragraph 15

This index provides a test of the law of one price, but the dollar prices of Big Macs are actually different in different countries.

This can be explained by a number of factors: transportation costs and government regulations, product differentiation, and prices of nonfood inputs.

Furthermore, in some emerging economies, western fast food represents an expensive niche product price well above the price of traditional staples — i. e. the Big Mac is not a mainstream ' cheap ' meal as it is in the West, but a luxury import for the middle classes and foreigners.

This relates back to the idea of product differentiation: few substitutes for the Big Mac allows McDonald's to have market power.

Countries like Argentina that have abundant beef resources see a structural underpricing in the Big Mac.