Cost of Living
The Big Mac sells for $5.69 in the US and $3.50 in China — a 38% implied yuan undervaluation. Across 173 cities the EIU tracks, Singapore and Zurich top the league; Damascus and Tehran sit at the bottom. Real differences in spending power are smaller than nominal exchange rates suggest.
Key insights
Big Mac index — quick PPP proxy
The Economist's Big Mac index compares the dollar price of a Big Mac across markets to gauge over- or under-valuation versus PPP. Switzerland (8.07 CHF ≈ $9.15) is roughly 60% overvalued vs the dollar; the yuan ($3.50) is 38% undervalued. The index is crude — burgers are non-tradable services and reflect local rents and wages — but tracks broader PPP measures surprisingly closely.
City rankings concentrate at the extremes
EIU's 2025 survey put Singapore and Zurich at the top, followed by Geneva, New York and Hong Kong. The cheapest cities are conflict-affected or under heavy sanctions — Damascus, Tehran, Tripoli, Karachi. Among major business hubs the spread between most and least expensive is roughly 2.5×.
Composition matters more than headline
Headline CPI baskets in advanced economies weight housing 25–35%, transport 12–18%, food 10–15%. In emerging markets food often exceeds 30% of the basket, which is why food shocks hit headline inflation harder. PPP-adjusted incomes give a more honest comparison of living standards than market-rate dollar GDP per capita.
Big Mac Index — selected countries (Jan 2026)
Local price converted to USD at market exchange rate
Key Finding: Switzerland and Norway lead the list at $9+; the yuan, ruble and Indian rupee are deeply undervalued on this metric.
Price level index — selected countries (USA = 100)
ICP-PPP price level, all goods and services
Key Finding: Switzerland, Norway and Iceland trade well above US price levels; most emerging markets sit at 40–60.
Methodology & caveats
PPP vs market exchange rates
Purchasing power parity rates equalize the cost of a fixed basket of goods. Market exchange rates reflect financial flows and are far more volatile. PPP rates change slowly because they reflect underlying productivity differentials. The IMF's WEO publishes both — comparisons of living standards use PPP, comparisons of cross-border trade use market rates.
CPI basket reweighting
National CPI baskets are reweighted every 1–5 years to reflect actual consumer spending. Pandemic-era shifts (less travel, more groceries) prompted accelerated rebasings in 2021–22. Substitution bias — when consumers swap to cheaper alternatives — means traditional Laspeyres indices slightly overstate inflation. Chained indices correct for it.
Limitations of city surveys
EIU, Numbeo and Mercer rank cities by the cost of a basket aimed at expatriate professionals. They don't capture local-resident costs (cheaper street food, lower-rent neighbourhoods). Numbeo crowdsources prices; EIU sends researchers to specified outlets. The two often disagree on rank order but agree on broad clusters.