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McDonald's Israel slashes price of benchmark Big Mac
By NADAV SHEMER
04/15/2012
Burger's price known as international economic benchmark demonstrating purchasing power.
 
If it is true that the price of a Big Mac is the best gauge of measuring a country’s purchasing-power parity, then Israel became a whole lot more affordable for its inhabitants overnight.

McDonald’s Israel slashed prices on a range of products at its 160-plus branches Sunday, including the benchmark Big Mac, which it cut from NIS 15.90 to NIS 11.90. Big Mac, Easy Mac, McFish Royal, McNugget and Corn-on-the-cob meal deals were reduced 16 percent from NIS 34.90 to NIS 29.90. Family meal deals were slashed by as much as 12%.

The company implemented the reductions following a price hike of up to 40% on certain products at its 40 kosher branches during Passover. It said the temporary price hike was introduced to compensate for the increased cost of producing kosher-for-Passover items such as rolls made from matza meal.

Sunday’s price cuts were planned well before Passover, a McDonald’s spokeswoman told The Jerusalem Post. She emphasized that the move was in no way related to negative reactions to the Passover price hike or to mass public protests over the cost of living that took place last summer and appear likely to resume this year.

Management made the decision to charge customers less on specific products “in order to broaden the price range of meals” and to make prices identical to and in some cases cheaper than can be found at McDonald’s in most European countries, the spokeswoman said. The prices of single items, such as the Big Mac, were reduced accordingly, she added.

Prices that were lowered on Sunday included: Easy Mac, from NIS 16.90 to NIS 12.90; McFish Royal, from NIS 14.90 to NIS 12.90; a serving of four chicken McNuggets, from NIS 16.50 to NIS 12.90; a serving of nine mini corn-on-the-cobs, from NIS 14.90 to NIS 12.90. The price of most other individual items, including french fries, salads and desserts, remained unchanged.

An Israeli Big Mac now costs the equivalent of $3.16, according to Sunday’s shekel-dollar exchange rate.

Israel was the 13th-most expensive of 43 countries when The Economist last published its Big Mac index on January 11.

The cost of an Israeli Big Mac was $4.13 at the time of the survey, less than in the United States ($4.30), but more than in many countries with far higher per capita income, including Britain ($3.82) and Singapore ($3.75). Switzerland was the most expensive place to purchase a Big Mac ($6.81), and India, where it is made with chicken instead of beef, the cheapest ($1.62).

The index is based on the theory of purchasing- power parity; in the long run, exchange rates should adjust to equal the price of a basket of goods and services in different countries. For example, the January index showed that the shekel was about 2% undervalued against the US dollar at the time. The exchange rate that would have brought the price of an Israeli Big Mac into parity with an American one was NIS 3.79 to the dollar, while the actual exchange rate was NIS 3.85.
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