Last Updated on Sunday, 21 February 2010 12:54 Written by admin Sunday, 21 February 2010 12:37
We’ve all been shocked when traveling to see how expensive or cheap local food is compared to what were used to. These differences can seem even more pronounced when you use the nominal exchange rate (dollars per pound or yen per dollar etc). If however you use a PPP adjusted exchange rate like the Big Mac Index (Korean Big Macs vs British Big Macs) the differences will seem less. This story from the Korea Herald compares nominal exchange rates and PPP adjusted exchange rates using Korean restaurant prices in London.
Big Mac Index helps compare London hansik
Glancing at a menu in a Korean restaurant in London, many would be horrified by the price - especially when they are comparing it to those in Korea.
Where doenjang jjigae - or bean paste soup - may cost 4,000 won ($3.40) in Korea, in London it can cost nearly three times as much at 6 pounds ($9.40).
However, when using the “Big Mac Index” - a light-hearted invention of the Economist designed to give a more accurate picture of prices in differrent currencies - Korean restaurants in London do not seem that bad.
The index takes the price of a McDonald’s Big Mac in various countries to give a better economic indicator of purchasing power. The cost of everything is higher in London: A single journey on the London Underground can cost 4 pounds ($6.20) and an umbrella, which is often needed, can easily cost around 10 pounds ($15.60).
When it comes to setting up Korean restaurants, their rent is higher, ingredients more expensive, and average wages are also higher in London (even when you take out the bonuses of the city’s bankers).
Using the Big Mac scale, which takes into account the cost of living, the prices of Korean dishes in London are on a par with those in Seoul. In fact, a Big Mac meal costs about the same as doenjang jjigae in both cities.