What factors other than currency overvaluation or undervaluation may contribute to the difference in the price of a Big Mac in Norway and Malaysia?The most expensive country in which to buy a Big...

What factors other than currency overvaluation or undervaluation may contribute to the difference in the price of a Big Mac in Norway and Malaysia?

The most expensive country in which to buy a Big Mac is Norway and the least expensive is Malaysia

Asked on by readeal3

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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There are so many local factors that could contribute to these differences in price.  All prices are set (in free markets) by the interaction of supply and demand.  There are many factors that could cause local supply or demand to vary greatly and would, thereby, affect the price.

In one country, for example, the cost of obtaining the supplies for a Big Mac may be much higher than in another country.  In one country, there might be much higher taxes on fast food restaurants.  In one country, McDonald's might have to spend a great deal on advertising.  All of these are factors that might reduce supply and lead to higher prices.

Conversely, there might be differences in demand.  In one country, a Big Mac might be a prestige food because of its connection to the United States.  In another country, there might be little demand for Big Macs because it does not really fit in with local tastes.  These differences in demand would lead to differences in price.

Because of these sorts of local factors, the relative prices of a Big Mac in different countries can differ for many reasons other than the strength of a country's currency.

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