In January 2010, the price of a Big Mac in Canada was dollar 3.63. Using data fr

Question

In January 2010, the price of a Big Mac in Canada was dollar 3.63. Using data from The Economist's Big Mac Index for January 2010, the following table shows the local currency price of a Big Mac in several countries and the actual exchange rate. At the time, a Big Mac in the United Kingdom would have cost you 1.99 British pounds. The actual exchange rate between the pound and the dollar was dollar 2.31 per British pound. The dollar price of a Big Mac in the United Kingdom was, therefore, 1.99 British pounds x dollar 2.31 per British pound = dollar 4.60, which is more than you'd have paid in Canada. For the price you paid for a Big Mac in the United Kingdom, you could have purchased a Big Mac in Canada and had some change left over for french fries. Purchasing power parity (PPP) theory states that exchange rates should equalize the prices of goods in any two countries. For the dollar price of a Big Mac to be the same in both countries, a Canadian citizen would need to be able to convert dollar 3.63 into exactly 1.99 British pounds. To find the exchange rate at which hamburger purchasing power is the same in both countries, divide the price in Canada by the price in the United Kingdom: PPP Exchange Rate (Canadian dollars per British pound) = dollar 3.63/1.99 British pounds = dollar 1.82 per British pound In January 2010, the dollar price of a Big Mac in the euro area was the dollar price of a Big Mac in Canada. What exchange rate would have equalized the dollar price of a Big Mac in Canada and the euro area? That is, what is the PPP exchange rate for Big Macs? dollar 0.77 per euro dollar 1.53 per euro dollar 3.63 per euro dollar 1.24 per euro If exchange rates had been adjusted to bring about Big Mac PPP between the dollar and the euro, the value of the euro would have against the dollar, and the value of the dollar would have against the euro.

Explanation / Answer

In Euro Zone price is 2.94 and exchange rate is $1.53 per Euro so 2.948 * 1.53 = 4.49

$4.49 is the price in of burger in Eurozone

It is same good that is bought in different regions of world, So you are asking what it equates,

$ 1.24 Per Euro is the answer

Here we have to divide 4.49/3.63 which gives us the original value

Fallen againist the dollar,

Risen.

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