Calculate the purchasing power parity between the two countries based on the given information. In January 2018, a McDonald’s Big Mac cost $5.28 in the U.S., while the same Big Mac could be bought for $3.17 in China during the same period. Take another example to compute purchasing power parity between China and the U.S. Therefore, the purchasing power parity ratio of the exchange for cupcakes is USD1 = INR41.67. Purchasing Power Parity of India w.r.t U.S. Purchasing power parity = Cost of 25 cupcakes in INR / Cost of 25 cupcakes in USDĬalculation of Purchasing Power Parity of India w.r.t U.S. Given the cost of 25 cupcakes in INR = ₹ 250Ĭost of 25 cupcakes in USD = $6, we can calculate the Purchasing Power Parity of India w.r.t U.S., The visitor claimed that, on average, 25 such cupcakes cost $6. The visitor bought 25 cupcakes for Rs.250 and noticed that cupcakes are quite cheaper in India. Suppose an American visits a particular market in India. Let us take the example of purchasing power parity between India and the U.S.
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You can download this Purchasing Power Parity Formula Excel Template here – Purchasing Power Parity Formula Excel Template Example #1